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Finance

Vanguard to close Hong Kong and Japan fund businesses

After partnering with Ant Group, US money manager shifts Asia HQ to Shanghai

Vanguard declined to say how many staff would be affected by the shutdown of its offices in Hong Kong and Japan.   © AP

HONG KONG -- Vanguard Group, the world's second largest money manager, will withdraw from Hong Kong and Japan and move its Asian headquarters to Shanghai.

Vanguard's Hong Kong operations include the offering of exchange traded funds that track Chinese, Japanese, Asian and European indexes. It will discontinue managing these along with the company's local pension fund offering and shut down other index-tracking operations.

The company said it would also halt distribution in Japan. A spokesman declined to say how many staff would be affected by the shutdown of the two offices.

The company launched a joint venture in April with Chinese financial services platform operator Ant Group which took off quickly with clients of its partner's Alipay system.

According to the preliminary prospectus Ant filed this week for an initial public offering in Hong Kong and Shanghai, its Bangnitou venture with Vanguard drew in 2.2 billion yuan ($318.18 million) from about 200,000 customers in its first 100 days of operations. The automated service uses artificial intelligence to recommend mutual fund portfolios to customers with as little as 800 yuan to invest.

Scott Conking, who took over as head of Asia in March, is said to have told staff in Hong Kong about the business shifts on Wednesday.

Vanguard launched a wholly owned subsidiary in Shanghai in May 2017, three years after opening a representative office in Beijing to serve Chinese institutional investors.

"Unfortunately, from a distribution business standpoint, the current industry dynamics (in Hong Kong) are better suited to institutional investors and do not currently support the scale needed for us to operate the economic engine behind our unique, low-cost, individual investor-orientated model," the company said in a media statement.

Vanguard decision will deal a blow to Hong Kong whose financial sector has been rattled by the national security law imposed on the city in June and the resultant heightened standoff between Washington and Beijing. Tokyo, Sydney, Taipei and other cities have been seeking to promote themselves as alternative regional financial services hubs.

Vanguard, which manages $6 trillion globally, closed its Singapore office in 2018.

In a statement to Hong Kong investors, Vanguard said it was considering appointing a replacement investment manager for its funds, among other exit options. Resolution could take two years, it said.

The fund manager said Hong Kong "is an important global financial center, and continues to be an important international capital market" for Vanguard.

"The Hong Kong stock market will remain as a critical component for Vanguard's global diversified funds," it said.

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