Vanguard gave up mutual funds in China, but working with Ant

BEIJING – Vanguard’s experience with financial technology in China is showing the first signs of success.

In less than a year, more than 1 million users have signed up for “BangNiTou”, a smartphone-based investment advisory product executed through the joint venture of the American mutual fund giant with Alibaba’s affiliated Ant Group.

This is according to a statement from BangNiTou on Thursday, just four days after Vanguard said it would abandon its own search for a mutual fund license in China. Instead, the company plans to focus on its partnership with Ant.

Ant operates Alipay – one of the two dominant mobile payment applications in China – on which BangNiTou sits.

The Vanguard branded product means “help you invest” in Chinese and launched in April 2020. It is a form of robotic advice, automated financial planning that uses data analysis to determine how a client should invest based on factors such as age and income.

Although these automated investment products have grown in popularity in the United States, the concept of personal finance – whether through human or automated consultants – is still much less common in China. Most locals save heavily to invest in the housing market or for medical treatment in the case of serious illnesses. This is partly the result of limited health insurance implementation, stock market volatility and high lows for fund investment.

For BangNiTou, the minimum investment is 800 yuan (US $ 123), about 10% of the average monthly salary officially reported in cities.

In July, Vanguard told the Financial Times that new customers were allocating a significantly larger amount, about $ 1,575 on average, to a total of $ 315 million in assets for 200,000 users. Updated figures were not available.

“Although the number of BangNiTou users has grown rapidly, the fund investment advisory market in China is still at an early stage with significant potential for further growth,” said Peter Zhang, CEO of the Vanguard joint venture with Ant, in a communicated.

Foreign financial institutions were given the long-awaited green light last year to take full ownership of local Chinese companies in futures, mutual fund management and securities. It is not clear which rules can be applied in financial or fintech technology.

Vanguard’s joint venture with Ant was launched in late 2019. Ant holds a 51% majority stake, according to the Chinese business database Qichacha.

The company affiliated with Alibaba claims about 1 billion users worldwide. She became one of the first participants in China’s wealth management sector with its money market fund linked to Alipay “Yu’e bao”, which had about 1.7 trillion yuan in assets under management at its peak at the beginning. 2018.

At the end of last year, Chinese authorities abruptly suspended Ant’s plans for what would have been the largest initial public offering to date. Subsequently, Beijing increased its regulations on fintech and said the industry should be subject to the same rules as banks.