Vanguard guidelines out China in massive worldwide push | USAEMALL.com

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Vanguard, the world’s second-largest asset manager, has ruled out re-entering China’s fund industry even as the group seeks to accelerate its global expansion beyond its biggest market in the US.

Chris McIsaac, head of Vanguard’s international business, told the Financial Times that the group decided to pull out of China two years ago because of “a mismatch” between its investment offering and demand from local investors.

“One of the important learnings for us was that the investment horizon for individual investors in China is still pretty short,” McIsaac said. 

“Vanguard’s offer . . . is a terrific offer for people who are saving for years and decades. There’s really a sort of a mismatch, if you will, in investment horizons, and so ultimately, we decided that it didn’t make sense for us to participate in China today.”

McIsaac added that the asset manager “ultimately concluded conditions just weren’t right for Vanguard in China at this point, and I don’t think for the near future”.

The fund group, which has $10tn in assets under management, closed its small Shanghai office in 2023 and sold its 49 per cent stake in a robo-adviser service with Jack Ma’s Ant Group.

But the decision to pull out of the world’s second-largest economy comes as other large fund groups continue to expand their mutual fund business to take advantage of China’s growing pension industry and increasingly wealthy population. 

Vanguard’s resistance to re-entering China also underscores the broader challenges that even titans of the investment industry continue to face in marketing and selling products in the country.

“We’re always open-minded about different markets, but there’s a lot of things that have to be in place,” McIsaac said, adding that Vanguard would monitor developments to consider future opportunities.

Vanguard is aiming to grow in other international markets in which it already has a presence, including the UK, Europe, Canada, Latin America and Australia. The group’s assets under management outside of the US reached $788bn in 2024, up more than 70 per cent over four years.

The asset manager, founded by renowned investor Jack Bogle five decades ago, offers low-cost “passive” funds that track indices as well as traditional mutual funds, selling to customers through financial advisers as well as directly to consumers through retail investment sites.

“The international business is beginning to matter more and more to the overall enterprise strategy and [is] becoming a bigger part of our growth,” McIsaac said. 

The group is focused on expanding in Australia’s pension market, with “big aspirations for cracking the top 10” of the country’s retirement superfunds.

In the UK, he said Vanguard’s Personal Investor site that sells directly to individuals had amassed nearly 800,000 investors and $37bn in assets under management.

However, Vanguard pulled out of the UK’s financial planning market after just two years in 2023.

McIsaac said there was at the time “an effort to work with my leadership team to take stock of all of the different markets in which we’re competing and the ways in which we’re competing . . . what markets are really working for us, what offers are resonating”.