The world's largest public fund withdraws from China? news confirmed, investors complain about "losing money and charging fees"
Pioneer Navigator will close its offices in China and bid farewell to the bustling city of Lujiazui. Source: Visual China
Author|Xiao Wang, Editor|Chen Fuye
Produced by Prism Tencent Xiaoman Studio
Rumors became prophecies far ahead.
Recently, Vanguard, the world's largest mutual fund company and asset management giant, was once again rumored to "withdraw from China and close its offices in China". According to a report by Yicai on November 10, Pioneer Pilot said that "the news is true". At that time, a person close to Pioneer also told the author that based on the above reply, the company did not expect to make any other response.
With $7.8 trillion in global assets under management and a reputation for low cost and index investment, Vanguard launched its first index fund for individual investors in the United States. In recent years, it has been actively deployed in the field of robo-advisory services. In China, ordinary users learn more about the company through its "help you vote" service launched in cooperation with Alipay.
However, the global asset management giant is not accustomed to the local environment in China, and its development is not satisfactory. After a series of variables such as senior management changes and strategic adjustments, Pioneer will regret missing out on the development feast of China's asset management industry.
Exited the joint venture with Ant
According to industrial and commercial data, on November 3, Pioneer Pilot Investment Consulting (Shanghai) Investment Consulting Co., Ltd., the main business entity of "Help You Invest", underwent a series of changes, its name was changed to Ant Investment Consulting (Shanghai) Investment Consulting Co., Ltd., Pioneer Pilot Investment Management (Shanghai) Co., Ltd. withdrew, and Ant (Hangzhou) Fund Sales Co., Ltd. became its wholly-owned shareholder.
Subsequently, in the face of media inquiries, Pioneer finally admitted that it would withdraw from China.
As early as March this year, Pioneer Pilot was rumored to be fully withdrawn from China. At that time, Ant Group replied that at present, Pioneer Pilot Investment Advisory Company and HelpYou Investment Products are running normally and will not respond to market rumors. Pioneer Pilot said that the cooperation between the shareholders of the investment consulting company has not changed, and the company's business and "help you invest" service are operating normally. We reserve the right to pursue legal responsibility for malicious speculation and false reports.
According to the data, Vanguard began to provide asset management services to China's central bank and sovereign wealth funds in 2009, and established Pilot Investment Hong Kong Co., Ltd. in Hong Kong in 2011. In 2014, Pioneer Pilot set up a representative office in Beijing, and in May 2017, it established a wholly-owned subsidiary, Pioneer Pilot Investment Management (Shanghai) Co., Ltd., in Shanghai.
In June 2019, it was in June 2019 that it jointly established Pioneer Pilot Investment Advisory (Shanghai) Investment Consulting Co., Ltd. with Ant Group, with Pioneer Pilot holding 49% of the shares and Ant holding 51% of the shares, and became one of the first batch of pilot institutions for fund investment advisory business at the end of the year. In April 2020, Ant and Pioneer Pilot's "Help You Invest" business was officially launched.
According to the official introduction, "Help You Invest" provides consumers with discretionary intelligent financial management services, using artificial intelligence-driven algorithms to recommend suitable investment portfolios from more than 6,000 public fund products, and charging a certain service fee, popularizing wealth management solutions that only serve high-net-worth individuals to the majority of investors on the platform. The investment threshold is as low as 800 yuan, and within 100 days of launch, it will attract about 200,000 new customers, with a total investment of 2.2 billion yuan.
In October 2021, Pioneer Pilot Investment Advisors said that the number of users who held positions in "Help You Invest" had exceeded 1 million, and 76% of users who had held positions for more than 3 months had achieved positive returns at that time.
However, no further business data has been disclosed since then. The Alipay page shows that "Help You Invest" currently serves more than 40 million people, and the minimum investment amount has been reduced to 100 yuan from more than 10,000 funds in the whole market.
Passive investment ideas are not adapted?
Founded in 1975 in the United States, Vanguard has pioneered index investment, which is becoming more and more popular in mature capital markets around the world, which is also the secret of Pioneer's rapid development.
According to some data, with 60% of stocks and 40% bonds as the benchmark for the portfolio of the asset management industry, the US 60/40 fund of Vanguard Navigator has returned 168% in the past 20 years.
Index funds don't try to outperform the market. According to research data cited by the Bank of China, index funds can beat the returns of more than 70%-90% of the funds in the securities market, and achieve the average return of the securities market in a long-term and stable manner. The performance of index funds does not depend on the fund manager's ability to judge the market and select stocks, so there is no need to hire senior investment and financial experts and analysts with high salaries, and there is no need to spend a lot of money on policy research, industry research and company research, so it can charge a lower fund management fee.
Lin Xiaodong, then president of Pioneer Group Asia and chairman of Pioneer Investment Management (Shanghai) Co., Ltd., said in an interview in 2019 that Pioneer had reduced the group's weighted average rate of assets in the United States to just 0.12%, far lower than the industry average of 0.62%. In the fund market of developed countries, the long-term returns brought by various fund investment strategies are not too different, and the probability of creating excess returns is very low, so the management fees of funds are important for the long-term returns of fund holders.
However, the passive index investment concept advocated by Vanguard is somewhat unsuitable in the Chinese market.
In many seminars in the asset management industry, industry experts generally mentioned that taking the US market as an example, the index has been rising in the long run.
The experience brought to the customer is better. Continental index products, on the other hand, are relatively limited, have limited investment options, and more importantly, their returns have been stagnant for a long time.
The Shanghai Composite Index, for example, fell one after another in October this year, and the call for "guarding 3,000 points" rose again. During the trading day from October 20 to October 25, the Shanghai Composite Index fell below 3,000 points at one point. In the long run, the market has previously had four rounds of "guarding 3,000 points", and if you invest in the index for a long time, the investor income experience is very poor.
The performance of the Shanghai Composite Index, screenshot from Straight Flush
In the Chinese market, fund companies and investors also prefer thematic and track-based funds, such as pharmaceutical, new energy, liquor and other industries, and prefer the individual trading ability of star fund managers, and the fund purchase boom in 2021 is mainly concentrated in several tens of billions and hundreds of billions of star fund managers.
Aggressive retail investors in China are also more inclined to speculate on individual stocks in order to earn higher returns. Conservative investors, on the other hand, are more accustomed to stable, fixed-income products such as bank deposits, bank wealth management or "baby-like" money market funds. After the new regulations on asset management require banks to break the rigid payment of wealth management, the net wave of bank wealth management at the end of 2022 has also shocked many investors, and many people have even returned to bank deposits with lower returns but capital protection.
It has not obtained a public fund license
Vanguard prides itself on not paying commissions to the issuance channel in any one market, and has largely adopted a model in which investors pay advisory fees instead of funds paying trailing commissions, and has led to a disruptive change in the distribution model in the local market.
This model has frequently hit a wall in the Chinese market. Some people in the fund industry told the author that sales channels are very important to fund companies, so a large number of foundations pay fees to banks and securities firms to obtain the support of these issuance channels. For example, the semi-annual report of China Merchants Bank shows that its agency fund income in the first half of the year was 2.856 billion yuan.
According to the Alipay page, there will be two parts of fees for transferring in to "Help You Invest", one is the subscription and redemption fee paid to the fund company based on the strategy when transferring in/out, and the other is the investment advisory fee for a series of services such as fund portfolio construction and fund rebalancing provided by "Help You Invest", with an annual rate of 0.5%.
Screenshot of Alipay page
Industry insiders pointed out that domestic investors are not used to paying for "investment advisory services", especially when investing in losses, investors are charged three fees (buying fees, selling fees, and investment advisory service fees) The experience is even worse.
On social media, some users also shared the experience of "helping you invest", especially in the context of the violent capital market volatility in the past two years, investors feel bad, and at the same time the product loses money, it is unacceptable to charge a lot of handling fees for selling.
"20,000 yuan to buy for 2 weeks, the income is 11.79 yuan, the purchase fee is 14.15 yuan, and now the selling fee is more than 80, don't play. Some investors complained. Similar voices are common in the comment section.
The 21st Century Business Herald also quoted industry insiders as saying that the cooperation between Pioneer Pilot and Ant is not particularly pleasant. "Vanguard's investment strategy R&D headquarters is in the United States, and what it gives to Ant is just a result, and in Ant's view, the investment strategy is like a black box, I don't know what is inside, but I can only sell it on the platform. Ant itself has a large amount of user behavior data, and this data is also confidential and cannot be provided to Vanguard, so the cooperation between the two parties has always been reserved. ”
Pioneer Pilot once wanted to show its strength. In an interview with Interface in August 2019, Lin Xiaodong said that in the future, if permitted by laws and regulations, Vanguard Group hopes to cater to the opening up of the domestic capital market and enter China's public offering market in the form of sole proprietorship.
But at the end of 2019, Lin Xiaodong left as a pioneer pilot. In August 2020, Pioneer announced that it would close its Hong Kong office and move its regional headquarters to Shanghai, and said that its future business focus in Asia will be focused on Chinese mainland. But in March 2021, it said it would suspend its application for a public fund license and was revealed to lay off half of its employees in Shanghai. According to the Financial Times, its practice of not paying commissions to third parties has affected its distribution, and even if it is licensed for a fund, it will be difficult to sell products.
However, in the eyes of the market, the exit of Pioneer Pilot is more due to its own development reasons. Global asset management giants are actively participating in the development of China's asset management market through joint ventures or wholly-owned companies.
For example, BNP Paribas Asset Management Holding Co., Ltd. and ABC Wealth Management have jointly established a joint venture wealth management company, and BlackRock and CCB Wealth Management have established a joint venture wealth management company.
According to the China Asset Management Market Report 2022-2023 released by Everbright Wealth Management, the total size of China's asset management market reached RMB133.8 trillion at the end of 2022 and is expected to maintain an annualized growth rate of around 9% to reach RMB275 trillion by 2030.