The Vanguard-Ant joint venture said in an emailed statement that it's "honored" to have served more than 3 million users, and will "continue to invest in and innovate around our research, products and services to improve the user experience." Vanguard and Ant deferred to the joint venture for comment.
The China firm, known as Vanguard Investment Advisors (Shanghai) Investment Consultancy Co., tripled its number of users at the end of 2021 from a year earlier, CEO Peter Zhang told a forum in January. The company declined to comment on its current number of users or assets under management. Bloomberg reported last year the venture managed about 6.9 billion yuan.
Rising competition in the Chinese market contributed to Vanguard's decision in 2021 to scrap plans for a stand-alone mutual fund business and stick with its Ant tie-up, in which it holds 49%. The partial withdrawal from China followed a pullback from Hong Kong and Japan the previous year.
Since Vanguard and Ant launched the BangNiTou service in 2020, the list of players in the robo space has expanded to more than 60. Vanguard is even facing competition from its own partner after Ant opened its Alipay platform to 14 rival providers, including Guotai Junan Securities Co. and Guolian Securities Co. Both firms had assets under management of more than 10 billion yuan as of Dec. 31.
Ant meanwhile is dealing with a crackdown from Beijing that forced it to scrap a planned $35 billion stock sale in 2020 and ordered it to overhaul its lending, insurance and wealth management businesses so that it can be regulated like a bank.
In response to the competitive threat, Vanguard's joint venture reduced fees by almost half last year, impacting the bottom line.
"While there's nothing wrong in cutting advisory fees, it's an unsustainable way to maintain clients, especially if the cuts lead to a price war," said Sun Guiping, an analyst at Shanghai Securities Co. He added that it's normal for a fund advisory business to post a loss in the early stages given the resources and time needed to develop clients.
Although the joint venture's revenue of almost 30 million yuan came in better than forecast, the profit targets will be more difficult to achieve as costs climb, one of the people said. Shortly after its launch, the Vanguard venture set a target of turning a profit in 2022.
Last year's expenses outstripped revenue by more than 70%, according to one of the people. Research and development costs doubled, while the venture has been cutting back on marketing expenses, one of the people said.
Slumping markets aren't helping. China's benchmark stock index has dropped 21% this year, one of the worst performers among major markets. China's investors are experiencing a "confidence crisis" after repeated losses, according to a survey by Yinhua Fund Management Co. this month.