New York

VANGUARD Group has abandoned plans to seek a mutual fund licence in China and will cut staff, in a rare sign of backpedalling among global asset managers targeting the world's second-largest economy.

The US firm will instead focus on building out its robo adviser joint venture with Jack Ma's Ant Group, according to a statement from the Malvern, Pennsylvania-based company.

The surprise move adds to Vanguard's partial retreat from Asia after the world's second-biggest money manager withdrew from Japan and Hong Kong last year and returned money to Chinese sovereign investors. Seeking a wholly-owned China mutual fund licence to provide low-cost funds was considered the company's key target for growth in the coming decades.

Global money managers from BlackRock to Neuberger Berman have announced aggressive plans to expand in China's US$3.2 trillion mutual fund market after the government opened the door to wholly-owned foreign fund dealers last year.

BlackRock was the first global firm to win approval for a 100 per cent- owned money manager, while more than 40 companies have set up joint ventures and some have applied for greater control. UBS Group has said it is weighing options to expand, including taking full control of its Chinese joint venture.

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Vanguard is now taking a step back and will focus on a robo adviser platform that it rolled out last year with Ant to target the Chinese fintech giant's more than one billion users.

Luo Dengpan, the former chief executive officer of Dacheng Fund Management who was hired by Vanguard last year to head the planned fund business, will stay on to lead the remaining team in Shanghai and focus on supporting the joint venture.

The venture started offering an automated service called Bang Ni Tou (Help You Invest), to capture clients with at least 800 yuan (S$165) to invest in mutual funds, the companies said last year.

Vanguard, which manages more than US$7 trillion globally, said on Tuesday that Bang Ni Tou signed up more than half a million individual Chinese investors in its first year. The robo adviser recommends a portfolio selected from 6,000 mutual funds, after assessing the user's risk appetite and investment horizon, the company said in April last year.

China's robo advisory market is expected to reach 737 billion yuan by 2022, according to a report by Lufax and consultant iResearch. Traditional financial institutions and a slew of fintech startups are gearing up to grab market share, including state-backed giants such as Industrial & Commercial Bank of China and China Merchants Bank. The Vanguard pause was reported earlier by the Wall Street Journal. BLOOMBERG