BEIJING, China (Reuters) – Vanguard, the world’s biggest mutual fund, launched its first wholly-owned subsidiary on the Chinese mainland last week. The group’s chairman and chief executive officer William McNabb III said the move was aimed at a greater penetration of the Chinese market.
Headquartered in Shanghai, the subsidiary will conduct business ranging from investment management, research to consultation in China.
McNabb said they tend to achieve two things with the new company.
One is to get closer to their clients in Shanghai and provide them with better services. The other is to further explore the Chinese market.
“I think more importantly in a lot of ways, it’s a chance for us to explore doing more in China. Today, most of what we do is at the very large institutional level. So it could be very very large institutions including some of the government-sponsored funds. We’d like eventually to be able to do more for the average investors. I think the only way we are going to learn, whether that’s even possible enough to do it well, is by having feet on the ground locally. So the team has a long-term mission to learn as much as they can, we’ll see what it develops,” he said.
Vanguard added China’s A-shares, Shanghai- and Shenzhen-listed stocks, to its Emerging Markets ETFs in 2015, making it among the first batch of foreign funds to gain access to the Chinese mainland stock market. McNabb said A-shares should be included into MSCI EM index as a global benchmark stock index.
“It is very difficult for me to understand how you can have a global stock indexes that don’t include A-shares. China is the second largest economy in the world, fastest growing economy in the world, second largest stock market in the world. For it to be truly a global player, it seems to me that it needs to be outside investment as well as obviously tremendous domestic investment, so inclusion in broader benchmarks makes a lot of sense to us and we hope it happens,” said McNabb.
Founded in 1975, the group is the world’s largest provider of mutual funds and the second-largest provider of exchange-traded funds. It had about four trillion U.S. dollars in global assets under management as of 2016.
Vanguard set up its Asian headquarters in Hong Kong in 2011 and established an office in Beijing in 2014.