Vanguard stopped mutual funds in China, but partnered with Ant

BEIJING – Vanguard’s experiment with financial technology in China is showing early signs of success.

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

That’s according to a report from BangNiTou on Thursday, just four days after Vanguard said it would drop its own pursuit of 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 apps in China – which has BangNiTou.

The Vanguard brand product means ‘help you invest’ in Chinese and was launched in April 2020. It is a form of robo-consulting, automated financial planning that uses data analysis to determine how a client should invest based on factors such as age and income. .

While such automated investment products have skyrocketed in popularity in the US, the concept of personal financing – whether through human or automated advisers – is still much less common in China. Most residents save heavily for an investment in the housing market or for medical treatment in the event of serious illness. This is partly due to the limited health insurance roll-out, stock market volatility and high fund investment minimums.

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

In July, Vanguard told the Financial Times that new customers allocated a significantly higher amount, averaging about $ 1,575 for a total of $ 315 million in assets across 200,000 users. Updated figures were not available.

“While the number of BangNiTou users is growing rapidly, the investment advisory market for funds in China is still in a nascent stage with significant potential for further growth,” said Peter Zhang, CEO of the Vanguard joint venture with Ant, in a statement.

Foreign financial institutions received a long-awaited green light last year to take full ownership of local Chinese companies in futures, mutual funds and securities. It is not clear which rules apply to financial technology or fintech.

Vanguard’s joint venture with Ant was launched at the end of 2019. According to the Chinese company database Qichacha, Ant has a 51% majority stake.

The Alibaba affiliate company claims approximately 1 billion users worldwide. It became an early player in the Chinese asset management industry with its Alipay-linked money market fund “Yu’e bao”, which had approximately 1.7 trillion yuan in assets under management in early 2018.

At the end of last year, the Chinese authorities abruptly suspended Ant’s plans for what would have been the largest IPO to date. Beijing subsequently tightened its fintech regulations, saying the industry should be subject to the same rules as banks.