Vanguard launches wholly foreign-owned enterprise in China

US investment giant Vanguard has launched a Shanghai-based wholly foreign-owned enterprise (WFOE) to target retail investors in China.

The newly established entity, located in the Shanghai Free Trade Zone is called Vanguard Investment Management (Shanghai). The WFOE’s legal representative is Charles Lin, who is also the US fund giant’s head of China, and the general manager is Clare Zhao, head of China institutional business at Vanguard, the company said.

The new entity will carry out investment management, investment consulting, client liaising and servicing, marketing, investment research, investor education and business development.

Vanguard has been previously serving institutional clients in China, including insurance, banking, asset managers and other financial institutions, for a number of years.

Lin, pictured left, said that Vanguard is “optimistic” about the Chinese market and that he was “excited about the long-term opportunities to serve 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,” he said.

Vanguard, the world’s second largest asset management company in terms of assets under management in the US, has joined a number of rival firms — including, as reported, Axa Investment Managers, Invesco and Neuberger Berman — in establishing a WFOE in China recently.

Through these mechanisms, international fund managers can avoid setting up businesses in China controlled by local partners.

Vanguard, which has U$4.2trn of assets under management, opened an office in Hong Kong in 2011 through which it sells its products to institutional investors.

1.3m HNWIs

The company’s Shanghai presence in China will allow Vanguard to begin exploring options for selling its funds to wealthy and retail investors.

China has more than 1.3 million people defined as high net worth individuals with assets of at least US$1.6m, according to the recently published Hurun Report.

The next step for the company will be to apply for a licence from the Asset Management Association of China (AMAC) that would allow Vanguard to launch funds in the country that could be sold directly to local investors.

Fidelity Int’l first in China

As reported, in January, Fidelity International announced it had become the first overseas investment company to have permission granted from AMAC to launch funds in China.

The company’s plans in China come despite industry concerns over the state of the country’s economy. On Wednesday ratings agency Moody’s downgraded China’s credit rating due to concerns over rising debt and the slow pace of economic reforms.