Vanguard’s assets under management surpassed $ 7 billion mark for the first time after the investment industry’s fiercest price competitor drew $ 186 billion in net cash inflows last year .
Based in Pennsylvania Avant-garde has become the second largest asset manager in the world after BlackRock by championing low cost investment funds to recruit an army of over 30 million clients since its inception by Jack bogle in 1975.
Investors poured a record $ 210 billion last year into Vanguard’s exchange-traded funds arm, which secured more than a quarter of all global ETF industry cash inflows in 2020. He lost some assets after dropping a handful of institutional clients in China and Australia.
General manager Tim buckley told the Financial Times that clients had “stayed the course” with Vanguard in 2020 when the coronavirus pandemic sparked a sharp correction in financial markets around the world.
“Investors have continued to trust us in the very difficult market conditions of the past year. The wealth of Vanguard’s clients increased by $ 930 billion during 2020, ”Mr. Buckley said.
Vanguard and its closest rival BlackRock dominate the global asset management industry due to the massive shift of investors to index ETFs over the past decade.
“Asset growth in passive index funds turns into a two-horse race with Vanguard and BlackRock leaving the rest far behind. The battle between the two titans is intensifying, ”said Amin Rajan, Managing Director of consultancy Create Research.
Vanguard, a private company owned by its fund investors, held the title of fastest growing asset manager for seven consecutive years through 2018 in terms of net inflows before being overtaken by BlackRock in 2019. Overall, Vanguard’s assets grew from $ 6.2 billion to $ 7.1 billion in the past 12 months.
BlackRock, which oversees assets of $ 7.8 billion, posted net inflows of $ 264 billion in the first nine months of 2020. Analysts predict BlackRock will have additional inflows in the last quarter of last year when the US stock market hit a record high.
Net inflows from global investors for Vanguard increased from $ 264 billion in 2019 to $ 186 billion last year, according to preliminary data provided exclusively to the Financial Times.
The drop is partly attributable to Vanguard’s net outflows of $ 14.2 billion international operations after retiring from managing over a dozen low-cost mandates on behalf of large institutional investors in China and Australia.
About $ 21.6 billion in assets were returned to China Investment Corporation, the sovereign wealth fund, China’s State Exchange Administration and National Social Security Fund, the state-backed pension scheme.
Vanguard aims to replace lost Chinese assets in time with investment advice partnership with Ant Group, a joint venture that has acquired 500,000 customers in less than a year.
Vanguard has also stepped down from mandates with 12 institutional clients in Australia, where it plans to build a retirement business that will challenge the country’s established retirement pension funds.
It also closed two US municipal money market funds with combined assets of $ 3 billion, which were affected by extremely low interest rates.
Some observers have wondered why Vanguard chose to get rid of its prestigious institutional clients.
Mr Buckley said these “tough financial decisions” would not have been possible for other investment managers, but they would allow Vanguard to focus more clearly on the job of helping individual investors.
“We are committed to helping investors retain more of their returns. We can really change outcomes for clients by providing high quality, low cost financial advice, ”he said.
Vanguard’s personal advisor services, which offer a combination of digital tools and human advice to clients, increased assets by $ 51 billion to $ 212 billion last year.
However, complaints have multiplied on investor notice boards about long wait times to speak to Vanguard advisers and service disruptions during times of high market volatility.
Mr Buckley acknowledged that the sudden “surges in investor interest” had caused problems, but noted that Vanguard was investing “hundreds of millions of dollars” in new digital capabilities to improve service standards for customers. .
“We can now collaborate through video technology, meet clients from the comfort of their own homes. It’s a whole new territory that is opening up and we plan to roll out these advisory services all over the world, ”he said.
Online trading apps, such as Robinhood, have attracted millions of new retail customers during the pandemic and sparked criticism for ‘fun’ investments.
“We are concerned that people will be drawn into day trading without fully understanding the risks. No investor should play with their retirement savings for fun, ”said Buckley.