China Post enters Europe via acquisition of RBS ETF range

Mar 24th, 2016 | By | Category: Alternatives / Multi-Asset

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China Post Global, the international asset management arm of the Chinese postal savings bank, has entered the European exchange-traded fund market with the acquisition of the Royal Bank of Scotland‘s ETF range. The purchase marks the first time a Hong Kong asset manager has acquired a European UCITS ETF umbrella and its investment management team.

China Post enters Europe via acquisition of RBS's ETF range

The international asset management arm of China Post has entered Europe through the acquisition of Royal Bank of Scotland’s ETF range (Photo © Carpkazu)

The acquisition enables China Post, which is co-owned by Capital Securities and Sumitomo Mitsui, to become the promoter and global distributor for the Market Access ETFs. The line-up currently includes 10 products, offering a range of exposures including Asian, emerging market and frontier market equities and commodities, listed on the Zurich and Frankfurt exchanges. China Post took the decision to delist the ETFs from the LSE owing to the funds’ low trading volumes on the exchange.

The ETFs, which currently have assets under management of around €360m, will be seeded with additional capital to make them more attractive to institutional investors. While the annual management fees on the existing ETFs will stay at between 50bps – 70bps, improved terms have been secured on the underlying swap contracts that will cut the overall cost to investors by up to 40bps per year. China Post has already secured multiple new Authorised Participants and market makers to increase the liquidity of the ETFs.

The acquisition marks the first step in China Post’s strategy to become a gateway between China and the rest of the world, providing mutual access in both directions for investors. The firm plans to cross-list the ETFs in Hong Kong, helping to grow demand in the funds, and to develop the Market Access brand.

Danny Dolan, Managing Director of China Post Global (UK)

Danny Dolan, Managing Director of China Post Global (UK)

Furthermore, China Post has announced plans to launch a host of innovative new ETFs in both China and Europe, including the first ever smart beta ETFs in Europe investing in Chinese securities. China Post will also target extensive distribution in mainland China.

The current ETFs are swap-based, but new launches will likely be a mix of physical and swap-based. The firm said it was not ideologically wedded to one replication method or another and would choose the best approach for each ETF based on the underlying index being tracked.

Danny Dolan, Managing Director of China Post in the UK, said in a statement: “This acquisition demonstrates China Post’s long term commitment to the European region. Our aim is to differentiate ourselves through innovation. For example, while ETFs giving exposure to China and smart beta strategies already exist, no-one in Europe has yet combined the two. Other differentiators for us include our access quotas to mainland Chinese securities, the strength of our parent companies and their distribution networks, and the strong financial engineering background of our team, which will help with product construction.”

The current range includes:

Market Access DAXglobal Asia Index UCITS ETF
Market Access DAXglobal BRIC Index UCITS ETF
Market Access DAXglobal RUSSIA Index UCITS ETF
Market Access MSCI Emerging & Frontier Africa ex South Africa Index UCITS ETF
Market Access MSCI Frontier Markets UCITS ETF
Market Access TOPIX EUR Hedged Index UCITS ETF
Market Access RICI Agriculture Index UCITS ETF
Market Access RICI Metals Index UCITS ETF
Market Access NYSE Arca Gold BUGS Index UCITS ETF
Market Access Rogers International Commodity Index UCITS ETF

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