U.S. asset manager Vanguard Group will close its Hong Kong and Japan operations and cut jobs across both locations as it shifts its Asian headquarters to Shanghai, it said on Wednesday.
The largest mutual fund company, with roughly US$6-trillion in assets under management, said in a statement its Hong Kong business mostly served institutional clients and not retail investors, which are its primary focus.
Hong Kong has been home to Vanguard’s main office in Asia after the index fund giant closed its Singapore operation in 2018. It said the departure from the Asian financial hub would take between six months and two years.
The move comes as U.S.-China relations are strained over issues including trade, territorial disputes and individual freedoms in Hong Kong. Asked whether events in Hong Kong played a role in its decisions, Vanguard spokeswoman Dana Grosser said in an e-mail that Vanguard still sees growth potential in the city.
“Hong Kong is an important global financial center, and continues to be an important international capital market for Vanguard,” she wrote. The city’s stock market “will remain as a critical component for Vanguard’s global diversified funds” while its securities channels will still provide access to Chinese stock and bond markets, she said.
Vanguard is seeking a “Fund Management Company” licence to serve retail investors directly in the mainland. It had launched a wholly foreign-owned enterprise (WFOE) in China in May, 2017, and announced a China advisory joint venture in December, 2019, with the country’s leading fintech company, now known as Ant Group, to provide retail investment advisory services.
Daniel Wiener, who edits a newsletter for Vanguard investors, said its move to Shanghai could help gain favour with the Chinese government. “No doubt it would look more favorably on a company operating directly on homeland soil,” he said in an e-mail.
Vanguard said it would exit its Hong Kong ETF (exchange-traded fund), mandatory provident fund and index-tracking investment schemes businesses.
An unspecified number of jobs would be lost as a result of the closing, according to the statement. Vanguard will no longer market or distribute products in Japan, and close operations there, it added. Spokespeople declined to say how many jobs would be cut in Hong Kong and Japan.
In Hong Kong, Vanguard runs six ETFs that are traded on the city’s stock exchange, according to its website.
The best performing of those was the Total China Index ETF, which had gained 15.5 per cent in terms of net asset valuation returns for the year up until July, the website showed.
Vanguard’s closing plans were first reported on Wednesday by Ignites Asia, a Financial Times service.
Ant, an affiliate of Alibaba Group Holding Ltd., is targeting a more than US$200-billion valuation in a dual listing in Hong Kong and Shanghai and operates Yu’ebao, one of the world’s largest money market funds.
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