Vanguard's Bold Bet

Vanguard has grown into the world's second-largest asset manager by sticking with a tried and true approach: a belief in passive investing with a long-term focus and an avoidance of the day's biggest trends. If there's an opposite to this year's meme-stock craze, Vanguard would be it. 

So today's announcement that Vanguard is opening its first ever foreign country fund felt like big news. Vanguard China Select Stock Fund will launch in early 2022. It's a big bet that China remains a dominant force in investing, despite a turbulent year for the world's most populous market. In a press release Vanguard said that it "takes a deliberate and thoughtful approach to product development." 

The firm added: "Vanguard research indicates that there is an opportunity for talented active managers to generate alpha in China’s large, but inefficient, equity market."

Investors choosing the fund have the benefit of buying low. The iShares MSCI China ETF is down 19% this year. Here's Evie Liu and Reshma Kapadia on the significance of Vanguard's timing:  

The move comes as many investors are reassessing their exposure to China. The country’s economic expansion is slowing and President Xi Jinping has rolled out sweeping crackdowns on its biggest companies as he shifts policy to focus more on balance and resilience, rather than growth. That has led to an emphasis on “common prosperity,” which many analysts see as a focus on social good over profitability that brings with it increased state intervention.

These changes have hit China’s market hard this year, so much so that some longer-term investors have started to look for bargains there. The diversification an allocation of money to China can offer is an additional appeal to investors, given that tensions between Beijing and Washington are likely to remain high.

The actively managed fund will have a minimum investment of $3,000 and an expense ratio of 0.83%. You can read the rest of Evie and Reshma's story here.