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Vanguard halts plan to seek mutual funds license in ‘crowded’ China market

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The logo for the Vanguard Group is shown on correspondence in Zelienople, Pa.

Keith Srakocic | AP

U.S. money manager Vanguard Group dropped a plan to obtain a mutual funds license in China, citing a “crowded” market and marking the latest shift in its Asia strategy.

Pennsylvania-based Vanguard, one of the world’s biggest mutual fund companies, said in a statement on Monday it will instead focus on opportunities in the $3 trillion Chinese mutual funds market through an existing advisory joint venture with Ant Group.

“At this stage, Vanguard believes it can provide more value to investors through the JV advisory service than by offering a select number of funds in what is already a fairly crowded mutual fund market,” it said.

Vanguard, which has assets of about $7.2 trillion, said in August it will close its Hong Kong and Japan operations as it shifts its Asian headquarters to Shanghai. It exited Singapore a few years ago.

The money manager said in October it will close most of its business managing money for institutional investors and large pension funds in Australia and New Zealand, and focus on serving retail clients.

Since China fully deregulated its giant mutual funds sector in April, global asset managers including BlackRock Inc and Fidelity have applied to set up wholly-owned mutual fund units in the country. The sector, though, already has about 150 players and is dominated by domestic companies.

Vanguard’s move to not seek a fund management company license in China will lead to a few redundancies, a representative said in an email to Reuters. The Wall Street Journal had earlier reported on Vanguard’s latest China move.

The fund manager said it would maintain a team in Shanghai focused on joint venture support, policy and market research, and business development, and that it maintained its long-term commitment to the China market.

“China…presents a significant opportunity for Vanguard to provide our advisory services and expertise to individual investors,” said Scott Conking, head of Vanguard Asia.

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