Vanguard to End Presence in Hong Kong, Japan With Job Cuts

Vanguard Group Inc. said it plans to end its onshore presence in Hong Kong and Japan to focus on individual investors in faster-growing parts of Asia, resulting in an undisclosed number of job losses.

The U.S. fund giant, with about $6 trillion in assets, said its Hong Kong business is targeted at institutional clients, and not the retail investors that are the firm’s primary focus. The changes will impact 70 positions in Hong Kong and Japan, according to an emailed statement. Some staff in Hong Kong will be made redundant while others stay for a period of time as the business is closed down.

A number of roles will be moved to Shanghai with Vanguard prioritizing China in its Asia plans, according to people familiar with the matter, who asked not to be identified as the discussions are private. The restructuring has been in the works from before the coronavirus pandemic, they said.

“Unfortunately, from a distribution business standpoint, the current industry dynamics are better suited to institutional investors and do not currently support the scale needed for us to operate” the firm’s low-cost model, the company said of its Hong Kong operations.

Scott Conking, a 36-year company veteran who was appointed to lead the Asia business in March, will work between Hong Kong and Shanghai as the latter city becomes Vanguard’s primary office in the region. The world’s second-largest money manager said it sees a “considerable opportunity” in China, where it has teamed up with billionaire Jack Ma’s Ant Group to develop a robo-adviser service for the fintech giant’s more than 1 billion digital customers. That’s a first step in winning a slice of the nation’s fast-growing asset management business.

Foreign asset managers are rushing in as China opens up its financial services market, where retail funds under management are predicted to grow to $3.4 trillion by 2023.

Vanguard runs at least six ETFs on the Hong Kong exchange including funds tracking China, Japan, Asia ex-Japan and developed Europe. The company will also exit Hong-Kong’s Mandatory Provident Fund and Index-Tracking Collective Investment Scheme platforms. The firm’s ETF assets in Hong Kong are about HK$3.3 billion ($430 million), according to data compiled by Bloomberg News.

In Japan, Vanguard said it will no longer actively market products or distribute new ones.

The Malvern, Pennsylvania-based money manager said the move doesn’t suggest the company isn’t bullish on Hong Kong.

“The Hong Kong stock market will remain as a critical component for Vanguard’s global diversified funds,” the company said. Vanguard services more than 30 million investors globally.

©2020 Bloomberg L.P.

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