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Vanguard takes tilt at fast-growing Chinese market

Asset manager’s Shanghai opening paves way to start selling funds to investors

16 HOURS AGO by: Jennifer Thompson in London
Vanguard is stepping up its presence in China by opening an office in Shanghai that should pave the way for it to sell its funds to the country’s fast-growing market of retail investors.

The world’s second largest fund company by assets has joined a clutch of rivals — including Axa Investment Managers, Invesco and Neuberger Berman — in establishing what is known as a wholly foreign-owned enterprise.

Through these, international fund managers can avoid setting up businesses in China controlled by local partners.

Pennsylvania-based Vanguard’s latest move in China highlights its focus on international expansion, and follows plans outlined last week by the company to push into the UK market through an online investment platform.

“This new milestone solidifies our commitment to China,” said Bill McNabb, chairman and chief executive of Vanguard. “Bringing our unique and proven investment approach to the millions of investors in China is an important initiative for Vanguard’s international business.”

Vanguard, which has $4.2tn of assets under management, opened an office in Hong Kong in 2011 through which it sells its products to institutional investors.

The company’s wholly foreign-owned enterprise in China will allow Vanguard to begin exploring options for selling its funds to wealthy and retail investors.

The next step for the company will be to apply for a licence from the Asset Management Association of China that would allow Vanguard to launch funds in the country that could be sold directly to local investors.

In January, Fidelity International, the Bermuda-based asset manager, announced it had become the first overseas investment company to secure permission from AMAC to launch funds in China.

China has more than 1.3m people defined as high net worth individuals with assets of at least $1.6m, according to the Hurun Report, which tracks such data.

“We are optimistic about the Chinese market and excited about the long-term opportunities to serve Chinese investors,” said Charles Lin, Vanguard’s managing director in China. “The launch of our [wholly foreign owned enterprise] is our first step to lowering the cost of investing in China and helping Chinese investors reach their investment goals.”

Vanguard opened a representative office in Beijing in 2014 partly to aid communication with regulators, but declined to comment on any contact with AMAC.

The company’s plans in China come despite lingering worries over the state of the country’s economy.

On Wednesday Moody’s downgraded China’s credit rating on concerns over rising debt and the slow pace of economic reforms.