Vanguard has scrapped its plan to secure a mutual funds licence in China, marking an exception to the latest trend of financial firms rushing to grab a share of the market.
The US-based $7.2trn investment management firm citing a “crowded” market as the reason behind this decision, which may result in a few redundancies, according to Reuters.
Instead, the money manager seeks to focus on building out its robo-adviser joint venture with Ant Group, according to a statement.
The JV utilises Alipay’s technological expertise and Vanguard’s advisory service capabilities to offer customised offering based on investor’s investment objectives, time horizon and risk preferences.
“At this stage, Vanguard believes it can provide more value to investors through the JV advisory service than by offering a select number of funds in what is already a fairly crowded mutual fund market,” the firm was quoted as saying by Reuters.
The end of the pursuit for the China licence comes after the firm revealed plans to close its operations in Hong Kong and Japan.
The firm said that its Hong Kong business serves institutional clients and not retail investors, which are its primary focus.
The firm will also shutter its business that manages money for institutional investors and large pension funds in Australia and New Zealand. It withdrew from Singapore a few years back.
The latest move is a deviation from the common trend of foreign firms eyeing the Chinese financial services market following the liberalisation of the market to boost competition.
In January this year, a report said that JPMorgan is in initial talks with China Merchants Bank to set up a Chinese joint venture (JV) in the wealth management space.
Last November, JPMorgan raised its stake in its China securities JV to 71% from 51%.
In December last year, American investment bank Goldman Sachs also signed an agreement to take 100% control of its securities JV in China.
In August 2020, BlackRock secured the regulatory nod to launch mutual fund unit in China.
China also gave the approval to the wealth management JV between BlackRock, Temasek and China Construction Bank.