Amid heightened competition among low-cost money managers, Vanguard has made a series of moves this year rolling back its global ambitions. It withdrew from Hong Kong and Japan, and returned $21 billion in managed assets to government clients in China. It shuttered most of its Australia institutional business.
Another blow came last week, when Vanguard lost its mandate to run at least $590 million in Taiwan government pension and insurance assets. The sum was redeemed in part because of the firm’s “unusual moves” in Asia, according to a Bureau of Labor Funds update.
“Vanguard’s vision for our international businesses is to improve investment outcomes for individual investors, either by serving them directly or through financial intermediaries,” Martino said in a statement. “We are focused on countries globally where our business model resonates.”
Institutional funds were at one point a pillar of Vanguard’s growth strategy in Asia. Back when William McNabb was chief executive officer, he made a point to travel to Asia at least once a year. After taking the helm in 2018, Tim Buckley opted out of his predecessor’s annual trips, according to a former employee in the region. They likely became impossible anyway with the pandemic.
That person and two former colleagues, speaking on the condition they not be identified, said the company found it increasingly difficult to commit the necessary resources to catering to the region’s institutional clients, who often require customization and individualized attention. In recent years the firm turned away some mandates from institutional customers because the fees generated were too low to justify the work, one of the people said. It still maintains a presence in defined contribution plans, a type of retirement plan, as well as in endowments and foundations.
Vanguard made several leadership changes this year. In July it named John James, formerly the head of Vanguard’s human resources division, to oversee institutions, preceding its pullback in Asia. Last week it appointed Chris McIsaac to lead its international business, succeeding a more-than three-decade company veteran, Jim Norris.
To its competitors — and especially smaller firms that have suffered outflows this year — Vanguard maintains an enviable position in money management. Its ETF inflows are a major bright spot: Vanguard trounced BlackRock in the first three quarters of the year as it continues to gain market share.
As it adjusts, Vanguard is doubling down on managing money for individual investors, setting up a potential price war for investment advice. It’s promoting a robo-adviser that selects portfolios made up of Vanguard ETFs. For those with about $50,000 or more to invest, Vanguard pushes a reduced-cost advisory service with access to a human via phone, email or video conference. Since setting up a joint venture with China’s Ant Group Co. last December, the duo unveiled a robo adviser aimed at customers with at least 800 yuan ($122) to invest, which recommends portfolios built from 6,000 mutual funds.
In a sense, the company is doubling down on the no-frills ethos that has worked so well for decades to weather the landscape it helped inspire.
“The Vanguard effect is hitting Vanguard,” said Eric Balchunas, an analyst at Bloomberg Intelligence. “It’s like a boomerang in a way.”
This article was provided by Bloomberg News.