Vanguard gave up on mutual funds in China, but working with Ant

An Ant Group logo is pictured at the company’s headquarters, a subsidiary of Alibaba, in Hangzhou, Zhejiang Province, China, on October 29, 2020.

Aly Song | Reuters

BEIJING – Vanguard’s experiment with financial technology in China shows signs of success.

In less than a year, more than 1 million users have signed up for “BangNiTou”, a smartphone-based investment advisory product operated by the American investment fund giant’s joint venture with Alibaba subsidiary Ant Group.

That came out from a publication by BangNiTou on Thursday, just four days after Vanguard announced it would end its pursuit of a mutual fund license in China. Instead, the company plans to focus on its partnership with Ant.

Ant operates Alipay – one of the two dominant apps for mobile payment in China – on which BangNiTou is based.

The Vanguard branded product means “help investing” in Chinese and was launched in April 2020. It’s a form of robo-advisory, automated financial planning that uses data analytics to determine how a customer should invest based on factors such as age and income.

While such automated investment products are becoming increasingly popular in the US, the concept of personal financing – whether through human or automated advisors – is even less common in China. Most locals save a lot for an investment in the housing market or for medical treatment for serious illness. This is partly due to the limited adoption of health insurance, volatility in stock markets, and the high minimum requirements for fund investments.

For BangNiTou, the minimum investment is 800 yuan ($ 123), which is roughly 10% of the officially reported average monthly wage in cities.

In July, Vanguard told the Financial Times that new customers had allocated a significantly higher amount, averaging about $ 1,575 for total assets of $ 315 million with 200,000 users. Updated figures were not available.

Ant holds the majority stake

“While the number of users of BangNiTou has grown rapidly, the fund investment advisory market in China is still in its infancy and has significant potential for further growth,” said Peter Zhang, CEO of Vanguard’s joint venture with Ant, in a statement.

Foreign financial institutions received the long awaited green light last year to fully acquire local Chinese futures, mutual fund management and securities businesses. It is not clear what rules might apply in financial technology or in the fintech space.

Vanguard’s joint venture with Ant was founded in late 2019. According to the Chinese business database Qichacha, Ant has a 51% majority stake.

The Alibaba affiliate claims to have around 1 billion users worldwide. It became an early player in China’s wealth management industry with Alipay-affiliated money market fund “Yu’e bao,” which peaked at around 1.7 trillion yuan in early 2018.

At the end of last year, the Chinese authorities abruptly suspended Ant’s plans for the largest IPO to date. As a result, Beijing tightened its rules on fintech, stating that the industry should be subject to the same rules as banks.

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