Vanguard Returns $21 Billion in Assets to China’s State Funds

(Bloomberg) -
Vanguard Group Inc. returned approximately $ 21 billion in assets under management to government clients in China as part of a global move to focus on low-cost funds for individual investors, according to people familiar with the matter. It is contemplated that BlackRock Inc. and Amundi SA will manage a portion of the funds returned by Vanguard.
The net worth includes approximately $ 10 billion, which Vanguard will provide to each of China's state foreign exchange administrations and the China Investment Corp. sovereign wealth fund. managed and declined to be classified as private. More than $ 1 billion has been returned to the national pension fund, they said.
The currency regulator will likely transfer control of their money to other managers, including BlackRock, while the pension fund will likely select Paris-based Amundi to manage some of their accounts. CIC folded the Vanguard funds into its own index investment platform.
Vanguard, the National Council for Social Security Funds, BlackRock and Amundi declined to comment. The CIC and China's currency regulator did not immediately respond to requests for comment.
Vanguard, the world's second largest money manager, is revising its Asia strategy and pulling out of Hong Kong and Japan to focus on individual investors in faster growing markets. While China remains critical to Vanguard as the nation continues to open its markets, exiting the institutional business means an unexpected slump for competitors as they also make their forays into the 100 trillion yuan (US Dollar).
Vanguard seeks to move away from managing funds for institutional clients, a company that is more sophisticated and less profitable. The sovereign customers' account managers were based in Hong Kong, part of an operation at Vanguard that is being dismantled.
Vanguard's plans for China were tested after Asian chief executive Charles Lin resigned abruptly last year and entered the $ 2.7 trillion public fund market as a global competitor.
At least 10 senior executives followed Lin out the door, including those in legal, human resources, risk management, and sales. Clare Zhao, who was the general manager of Vanguard's wholly foreign-owned company in Shanghai, moved to Amundi to take over the management of its China business this month, a well-known person said.
New appointment
While New York-based BlackRock has received regulatory approvals for its first wholly owned foreign mutual fund license and joint venture with a Chinese bank, Vanguard has yet to file an application for a license to manage funds for individual investors. Lin was one of the main negotiators with Chinese regulators.
Vanguard announced the appointment of Luo Dengpan as general manager of a proposed mutual fund unit in China on September 22nd. Luo will be based in Shanghai and report to Asian director Scott Conking.
China is a huge market for money managers, not only because of its huge size and wealth management potential, but also because the fees are more lucrative than the US. The retail fund market could grow to $ 3.4 trillion by 2023, according to Deloitte LLP.
Vanguard formed a joint venture with Ant Group in December introducing a new robo-advisor for the fintech giant's hundreds of millions of users. The company, which is still in its infancy, is offering an automated service to attract customers with at least 800 yuan to invest in mutual funds.
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