Vanguard Group and Ant Financial’s joint venture is rolling out a new robo adviser to target the Chinese fintech giant’s 900 million users, a first step in winning a slice of the nation’s fast growing asset management business.
The venture started offering an automated service called “Bang Ni Tou” (Help You Invest), to capture people with at least 800 yuan ($113) to place in mutual funds, the companies said on Thursday.
“What we do is help users select an entire football team, instead of just one player,” Peter Zhang, chief executive officer of Vanguard Investment Advisors (Shanghai) Investment Consultancy Co., said in an interview. “We help our users by selecting a portfolio of investments that generate long-term returns.”
While the coronavirus outbreak has rocked the Chinese economy, the nation is proceeding apace with the further opening of its financial industry this month. Foreign asset managers are now rushing in to establish a foothold in a retail funds market that could grow to $3.4 trillion by 2023.
The robo adviser will recommend a portfolio selected from 6,000 mutual funds, after assessing the user’s risk appetite and investment horizon. The transactions are done automatically and the robo adviser will also help investors re-balance their portfolios if necessary.Ant, controlled by billionaire Jack Ma, is a $150 billion juggernaut that operates everything from payments to money market funds and credit scoring, The new joint venture — in which Ant holds a 51% stake and Vanguard 49% — has been approved by the China Securities Regulatory Commission.
Users can access the service through the apps Alipay and Ant Fortune, a wealth management platform.
Clare Zhao, the general manager at Vanguard Investment Management (Shanghai) Ltd., said the company’s main work with Ant is to create a service that’s as easy to use as possible.
The company has hired multiple dozens of people, said Zhang, who declined to be more specific on hiring and divulge revenue and user targets. The robo adviser charges a 0.5% management fee, with Ant and Vanguard splitting the profit based on their stakes in the venture.
China’s robo-advisory market is expected to reach 737 billion yuan by 2022, according to a report by Lufax and consultant iResearch. Traditional financial institutions and a slew of fintech startups are gearing up to grab market share, including state-backed giants such as Industrial & Commercial Bank of China Ltd. and China Merchants Bank Co., according to the report.
In addition to Vanguard, Ant also partners with other international asset managers such as Fidelity International, Schroders Plc and UBS Group AG. Currently, these companies mainly work through Ant’s Caifuhao, an AI-powered corporate account on its wealth management platform, to provide customized investor education.
Ant plans to work with more international financial institutions in the future, it said in a statement.
Vanguard services 30 million investors globally, managing $6.2 trillion of assets as of January.
(Updates with company CEO in third paragraph)
—Lulu Yilun Chen (Bloomberg)