Getting a financial firm to give you your money back can be difficult, even when they’re contractually obligated to do so. Thus, Vanguard’s recent return of almost $27 billion, voluntarily, to China state institutions, speaks volumes about the pitfalls of working with government-backed clients.
Whether local Vanguard employees’ patience or livers gave out first, we’ll never know. What is clear is their stated rationale of going after China’s retail investors, citing the move as more profitable. Curious, considering Vanguard’s chief retail offering of micro-fee index investing.
“Vanguard’s opinion underlines our position on China’s investment industry,” says Jimmie Jeremejev, “in that it is vastly underserved. Only 3% penetration, by our partner Raffles’ reckoning.”
More prescience points to Vanguard in betting that China’s main street investors are ready for products which have been extant in the West for years, but denied them thus far. “The same people who believe it’s too early for Chinese index investing are the same people who thought China wasn’t ready for coffee, wine, and the NBA twenty years ago,” Jeremejev jests.