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Vanguard, the second-largest asset management firm globally, has decided not to return to China’s fund market, despite its plans to expand internationally beyond its primary market in the US.
Chris McIsaac, who leads Vanguard’s international operations, told the Financial Times that the company exited China two years ago due to a “mismatch” between what it offered and what local investors wanted.
McIsaac mentioned, “One key takeaway for us was that individual investors in China generally have a short investment outlook.”
“Vanguard’s offerings are ideal for those saving over many years. There’s an evident mismatch in investment timelines, leading us to think it wasn’t practical for us to be involved in China at this time,” he added.
He further stated that the firm “ultimately realized that the circumstances weren’t favorable for Vanguard in China right now, and likely won’t be in the near future.”
With $10 trillion in assets under management, Vanguard closed its small operational office in Shanghai in 2023 and divested its 49% share in a robo-advisory service linked to Jack Ma’s Ant Group.
This exit from the world’s second-largest economy occurs while other significant fund companies are growing their mutual fund operations to capitalize on China’s expanding pension sector and increasingly affluent population.
Vanguard’s hesitance to re-enter China highlights the broader obstacles that prominent investment firms still encounter while promoting and selling their products in the region.
“We’re always open to exploring different markets, but several factors must align,” McIsaac stated, adding that Vanguard would keep an eye on developments for potential future prospects.
The firm is focused on expanding in other regions where it already operates, including the UK, Europe, Canada, Latin America, and Australia. As of 2024, Vanguard’s managed assets outside the US totaled $788 billion, a rise of over 70% in four years.
Founded by the acclaimed investor Jack Bogle fifty years ago, Vanguard provides low-cost “passive” funds that track various indices, alongside traditional mutual funds, marketing them through financial advisors and directly to consumers via retail investment platforms.
McIsaac noted, “The international sector is becoming increasingly important to our overall strategy and contributing significantly to our growth.”
The company aims to enhance its position in Australia’s pension sector, with ambitions to rank among the top 10 retirement superfunds in the country.
In the UK, McIsaac shared that Vanguard’s Personal Investor platform, which sells directly to consumers, has attracted nearly 800,000 investors with $37 billion in assets under management.
However, Vanguard ceased operations in the UK’s financial planning market after just two years in 2023.
McIsaac remarked that there was an initiative at that time “to collaborate with my leadership team to evaluate our performance across various markets and our competitive strategies . . . assessing which markets are successful for us and which offerings resonate well.”
