Vanguard Plans Capital Boost in Ant Venture After China Retreat

Vanguard Group and Ant Group Co. plan to boost capital at their joint robo advisory in China just weeks after the U.S. fund giant announced a surprise pull back from the trillion-dollar mutual fund market.

The companies are in talks to increase the total registered capital in the joint venture to 150 million yuan ($23.4 million) from 50 million yuan, according to people familiar with the matter, who asked not to be identified because the issue is private.

“We believe in the power of financial advice to help investors achieve better investment outcomes, and are committed to our joint venture with Ant Group and our mutual goal to bring advice to millions of Chinese investors,” Vanguard said in a statement.

Ant declined to comment in an emailed statement.

Vanguard is betting on its tie-up with Ant after ditching plans in March for a wholly-owned mutual fund license. The venture gives it a presence in a retail market that could grow to $3.4 trillion by 2023. High costs and the lack of competitive advantages likely prompted Vanguard to drop its bid for a license, according to Bloomberg Intelligence analyst Francis Chan.

The two finance companies started offering an automated service called “Bang Ni Tou” (Help You Invest) last April to capture clients with at least 800 yuan to invest in mutual funds.

The joint venture -- in which Ant holds a 51% stake -- offers portfolios selected from more than 6,000 domestic mutual funds, accessed through Alipay and Ant Fortune, a wealth management platform. The shareholding structure will remain the same after the capital increase, the people said.

The robo advisor’s client base almost doubled to 940,000 in February from about 500,000 at the end of last year, another person familiar has said. Assets under management jumped 60% during the period to 6.9 billion yuan, the person added.

China’s robo-ad­vi­sory market is expected to reach 737 billion yuan by 2022, according to a report by Lufax and consultant iResearch. Traditional financial institutions and a slew of fintech startups are gearing up to grab market share, including state-backed giants such as Industrial & Commercial Bank of China Ltd. and China Merchants Bank Co., according to the report.

While Vanguard, which manages more than $7 trillion globally, remains the only foreign player in the mutual fund advisory trial, it will now have to compete with its own partner. Jack Ma’s Ant Group began offering an investment advisory platform known as Tougu Guanjia on its Alipay app in March, working with five Chinese asset managers. Some 18 companies were approved by the securities regulator to offer fund advisory services in the country as of March.

©2021 Bloomberg L.P.

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