Vanguard, the world’s largest mutual fund manager and second-largest largest ETF provider, has launched a wholly-owned subsidiary in China called Vanguard Investment Management (Shanghai) Limited. Structured as a wholly foreign-owned enterprise (WFOE), the new entity will enable Vanguard to bring its investment philosophy to Chinese investors.
Vanguard launched the first index fund aimed at retail investors in 1975 and is now the largest mutual fund manager in the world.
Vanguard has $4.2 trillion in assets under management, with some $715 billion invested in US-listed ETF assets as of 23 May 2017.
The newly established WFOE office, located in the Shanghai World Financial Centre, will carry out investment management, investment consulting, client liaising and servicing, marketing, investment research, investor education and business development.
The WFOE’s legal representative is Charles Lin, Vanguard’s head of China, and the general manager is Clare Zhao, Vanguard’s head of China institutional business.
William McNabb III, chairman and CEO of Vanguard, commented: “This new milestone solidifies our commitment to China. Bringing our unique and proven investment approach to the millions of investors in China is an important initiative for Vanguard’s international business.”
Vanguard has been serving institutional clients in China, including insurance, banking, asset managers and other financial institutions, for a number of years. In 2014, it set up a representative office in Beijing to facilitate communication between its institutional clients in China and its Hong Kong office, as well as work with regulators.
Unlike other investment management companies, Vanguard is not listed, nor is it privately held. Instead, it is owned by its mutual funds, which in turn are owned by their investors. This mutual structure means Vanguard is able to pass profits to its fund investors in the form of lower expense ratios, as well as reinvest in the business to improve client experiences and outcomes.
The asset weighted expense ratio of Vanguard’s US funds is 0.12%, compared to the US industry average of 0.62%.
“We are optimistic about the Chinese market and excited about the long-term opportunities to serve Chinese investors,” said Charles Lin, managing director, country head of China. “Our unique ownership structure and longstanding commitment to low-cost investing mean we are well positioned to serve the needs of Chinese investors. The launch of our WFOE is our first step to lowering the cost of investing in China and help Chinese investors reach their investment goals.”