Vanguard’s operation in China is a 49/51 percent ownership with ANT.
Historically, China had required all companies with foreign ownership to be joint ventures with the Chinese holding the majority ownership. Often, this didn’t mean the Chinese put up 51% of the assets. It means that the Chinese got 51% of the votes and 51% of the profits, without necessarily putting much into the venture.
Because they control 51% of the votes, every decision that requires board approval needs to be supported by the Chinese, and they obviously don’t approve unless it is financially beneficial to them. Negotiations can go on for months.
We don’t know the specifics of the Vanguard/ANT relationship, but I would predict that it would have been problematic from the start.
Also, the article says Vanguards retraction leaves $3.9T on the table for competitors to gobble up. That is not the size of Vanguard’s business in China. That’s the size of the total investment marketplace in China. Vanguard’s current total worldwide assets under management is about $7-8T. China would be a tiny fraction of that.
We don’t know. from this article the size of the business that Vanguard is exiting.
My bet is that Vanguard got tired of the joint venture negotiations and the are also reading the tea leaves. Xi goes to Russia to visit Putin. Biden warned Xi that companies would withdraw voluntarily from China if they supported Putin in the war in Ukraine."
I just spent a half hour writing a response I felt good about and it disappeared :( Anywhooo ...I don't have the brain power to go into the details again ...but I can say from personal experience dealing with Vanguard and meeting with Jack Bogle (The Founder) ...I "KNOW" how seriously he took his "Fiduciary Responsibility"! He cared about the safekeeping of his customers assets as if they were his own! He made sure his funds had the lowest management fees in the entire industry by keeping marketing (advertising in particular) fees from being passed through to shareholders. ie; Vanguard average expense ratio: 0.09%. Industry average expense ratio: 0.49%.
This guy was one of the "Good Guys" and I think it's important to understand who Jack was if we are to understand what Vanguards exit from China is signalling!
When Jack got burned by merging Ivest funds (a "Go-go fund" ...a "flavor of the times" so to speak) with Wellington Management ...he learned a valuable lesson....it was a "debacle" that would cost him his job. He would never be taken in by a "trend" ever again and on-the-ground research/planning became core to Vanguards success . Jack's mistake convinced him that rather than trying to actively beat the market, he should create a passively managed fund that tracked the market. And, ultimately, that led to his crowning achievement: launching The Vanguard Group and creating the world’s first index mutual fund.
What I'm trying to say here is: Vanguard as a Corporation has a distinct "personality" all its own (they all do) ie; ....Fidelity Corporate culture and Vanguard's are distinctly different from one another (thank God) and it comes from the top. Jack was one of the most altruistic leaders in the industry! He made sure Vanguard's operating costs and management fees were the lowest in the industry all because of who he is....he really cared! He wanted to put every cent back into his customers pockets. When a guys says: “My only regret about money is that I don’t have more to give away” ;that's a guy that cares about society.
With the above said, I would bet anything that Vanguard's teams of experts believe we are going to war! For Vanguard to retract from China means leaving approximately 27 trillion yuan or $3.9T on the table for competitor investors to grab. When a Company as Investment Savvy as Vanguard signals an exit like this ....and leaves money on the table ... I think anyone trying to grab this business is being an idiot.
Here is a comment from a really smart friend:
"There’s missing and misleading information here.
Vanguard’s operation in China is a 49/51 percent ownership with ANT.
Historically, China had required all companies with foreign ownership to be joint ventures with the Chinese holding the majority ownership. Often, this didn’t mean the Chinese put up 51% of the assets. It means that the Chinese got 51% of the votes and 51% of the profits, without necessarily putting much into the venture.
Because they control 51% of the votes, every decision that requires board approval needs to be supported by the Chinese, and they obviously don’t approve unless it is financially beneficial to them. Negotiations can go on for months.
We don’t know the specifics of the Vanguard/ANT relationship, but I would predict that it would have been problematic from the start.
Also, the article says Vanguards retraction leaves $3.9T on the table for competitors to gobble up. That is not the size of Vanguard’s business in China. That’s the size of the total investment marketplace in China. Vanguard’s current total worldwide assets under management is about $7-8T. China would be a tiny fraction of that.
We don’t know. from this article the size of the business that Vanguard is exiting.
My bet is that Vanguard got tired of the joint venture negotiations and the are also reading the tea leaves. Xi goes to Russia to visit Putin. Biden warned Xi that companies would withdraw voluntarily from China if they supported Putin in the war in Ukraine."
I just spent a half hour writing a response I felt good about and it disappeared :( Anywhooo ...I don't have the brain power to go into the details again ...but I can say from personal experience dealing with Vanguard and meeting with Jack Bogle (The Founder) ...I "KNOW" how seriously he took his "Fiduciary Responsibility"! He cared about the safekeeping of his customers assets as if they were his own! He made sure his funds had the lowest management fees in the entire industry by keeping marketing (advertising in particular) fees from being passed through to shareholders. ie; Vanguard average expense ratio: 0.09%. Industry average expense ratio: 0.49%.
This guy was one of the "Good Guys" and I think it's important to understand who Jack was if we are to understand what Vanguards exit from China is signalling!
When Jack got burned by merging Ivest funds (a "Go-go fund" ...a "flavor of the times" so to speak) with Wellington Management ...he learned a valuable lesson....it was a "debacle" that would cost him his job. He would never be taken in by a "trend" ever again and on-the-ground research/planning became core to Vanguards success . Jack's mistake convinced him that rather than trying to actively beat the market, he should create a passively managed fund that tracked the market. And, ultimately, that led to his crowning achievement: launching The Vanguard Group and creating the world’s first index mutual fund.
What I'm trying to say here is: Vanguard as a Corporation has a distinct "personality" all its own (they all do) ie; ....Fidelity Corporate culture and Vanguard's are distinctly different from one another (thank God) and it comes from the top. Jack was one of the most altruistic leaders in the industry! He made sure Vanguard's operating costs and management fees were the lowest in the industry all because of who he is....he really cared! He wanted to put every cent back into his customers pockets. When a guys says: “My only regret about money is that I don’t have more to give away” ;that's a guy that cares about society.
With the above said, I would bet anything that Vanguard's teams of experts believe we are going to war! For Vanguard to retract from China means leaving approximately 27 trillion yuan or $3.9T on the table for competitor investors to grab. When a Company as Investment Savvy as Vanguard signals an exit like this ....and leaves money on the table ... I think anyone trying to grab this business is being an idiot.
No light to shed. Makes one wonder what Vanguard knows that others don’t.