Hong Kong welcomes its first actively managed ETF

Jun 19th, 2019 | By | Category: Fixed Income

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The Hong Kong stock exchange has welcomed its first actively managed ETF – the ICBC CICC USD Money Market ETF – launched by China International Capital Corporation (CICC).

Hong Kong ETFs

Hong Kong stock exchange has welcomed its first actively managed ETF and inverse leveraged ETF over the past month.

Brian Roberts, Senior Vice President and Head of Exchange Traded Products at Hong Kong stock exchange, said, “The introduction of active ETFs in Hong Kong is in response to investors’ increasing demand for more investment choices in the market.

“We believe the product launch will help to drive product innovation in the ETF market.”

Sub-advised by ICBC Global Asset Management, the ETF invests in US dollar short-term deposits and money market investments issued by governments and other organizations.

According to CICC, the ETF is expected to achieve an approximate 2.6% annualized yield before fees.

ETF administrator and custodian Brown Brothers Harriman (BBH) has been appointed to service the fund which is being offered with a same-day settlement cycle for all primary market creations and redemptions.

“Given our support of actively managed ETFs globally, we are thrilled to be working with CICC and ICBC to launch the first actively managed ETF in Hong Kong,” added Chris Pigott, BBH’s Head of Hong Kong ETF Servicing. “Investors in Hong Kong historically have been focused on actively managed investments. The ability to combine the structural benefits of the ETF wrapper with an active investment strategy is an interesting opportunity for investors, especially in light of the fact that our recent ETF investor survey found that nearly 50% of institutional investors in Hong Kong expected to increase their exposure to actively managed ETFs this year.”

“We are excited to launch this first of its kind, actively managed ETF, in Hong Kong,” added Ning Lin, Managing Director of CICC Hong Kong Asset Management. “BBH’s customized service model and ability to support product features that have never existed in this market before is invaluable. When innovating in this way, it is critical to work with a recognized ETF servicing expert, one with global experience in actively managed ETFs, and we are pleased to further expand our partnership with BBH.”

The fund, which has debuted with seed capital of $120 million, is available to trade in US dollars and Hong Kong dollars under the tickers 3011 HK and 9011 HK respectively. It comes with an ongoing management fee of 0.25%.

This relatively low price tag means the fund is cheaper than the two existing money market ETFs currently listed in Hong Kong – the CSOP Hong Kong Dollar Money Market ETF and CSOP US Dollar Money market ETF – which both come with management fees of 0.30%.

Local financial regulator the Securities and Futures Commission (SFC) paved the way for Hong Kong’s first actively managed ETF in December 2018, following an update to its Code on Unit Trusts and Mutual Funds. Hong Kong now becomes the third market in the Asia Pacific region to launch actively managed ETFs after Australia and South Korea.

The SFC has actively sought to spur innovation and asset flows within the local ETF industry in recent years following concerns that Hong Kong was falling behind regional rivals.

The regulator granted approval for the listing of inverse and leveraged ETFs in Hong Kong in February 2016 and just last month welcomed the first inverse leveraged ETF on Hong Kong stock exchange.

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