AsiaÆs ETF realm ripe for conquering, says Deutsche
Deutsche Bank, preparing to list exchange-traded funds in Hong Kong, Singapore and Japan, says its x-trackers series will repeat the success it has recently enjoyed in Europe.
Deutsche Bank entered the European market for exchange-traded funds (ETFs) only 18 months ago and now claims a nearly 14% market share of assets, totalling Ç15.1 billion ($22.2 billion). Next up: Asia.
The investment bank intends to list products from its ETF series, db x-trackers, in Hong Kong in the next few weeks, to be followed by Singapore and Tokyo. Some will come from the existing range, including funds in equities, fixed income, currency and commodities, and the firm will also launch a few with an Asian flavour, says Thorsten Michalik, Frankfurt-based managing director of the db x-trackers business.
He says likely products could include fixed-income ETFs tracking Asian government bond or credit indices, money-market benchmarks and local equity indices.
Celine Flamain, a member of DeutscheÆs trading team in Hong Kong, has been anointed the bankÆs ETF tsar in Asia, and will be responsible for liaising with the investment bankÆs market makers, the lawyers, and marketing and salespeople.
The bank is confident that, after a long period of slow growth, ETFs are going to become as popular among Asian institutions as they are in the US and, more recently, in Europe.
A big catalyst for ETFs to experience heady growth in America and Europe (with compound annual growth rates of 39% and 53%, respectively, at their peaks) was the diversification of these instruments beyond mere equity-index trackers. Deutsche Bank, for example, was the first to introduce credit bond trackers in Europe. Secondly, the number of European and now Asian investors experimenting with ETFs is on the rise, as pension funds and others seek ways to gain exposures with low fees.
ETFs in Asia and Europe have therefore enjoyed growth even as regional and global equity markets have suffered declines (but not in America, simply because they are already so widely used). This year AsiaÆs ETF universe has grown by 5.2%. ôEven when equity markets are falling, there is new money moving into bond ETFs, money-market ETFs and commodity ETFs,ö says Raimar Dieckmann, senior economist in Frankfurt.
As of the end of June 2008, the Asian ETF market had $64 billion of assets under management, of which $36 billion is in Japan. That total is up from $59 billion in January. Trading volumes have also increased across the region, while fund managers and investment banks are listing more products.
Deutsche Bank thinks it can make a splash in this region. Currently the big players are Japanese firms such as Nomura Asset Management and Nikko Asset Management, which dominate the Japanese market; State Street Global Advisors, thanks to the $3.6 billion Hong Kong Tracker Fund; BGIÆs iShares Asia trust, also listed in Hong Kong with $3.4 billion; and Hang Seng Asset Management, which manages $4 billion in Hong Kong- and A-share ETFs.
It believes its swaps-based ETF, in which Deutsche BankÆs on-the-ground trading arms can make markets, provides a much tighter tracking error than is found in traditional ETFs managed by buy-side firms. Lyxor Asset Management, a unit of SG, has already beaten Deutsche to the punch by introducing its own version of swaps-based ETFs in Asia.
The investment bank intends to list products from its ETF series, db x-trackers, in Hong Kong in the next few weeks, to be followed by Singapore and Tokyo. Some will come from the existing range, including funds in equities, fixed income, currency and commodities, and the firm will also launch a few with an Asian flavour, says Thorsten Michalik, Frankfurt-based managing director of the db x-trackers business.
He says likely products could include fixed-income ETFs tracking Asian government bond or credit indices, money-market benchmarks and local equity indices.
Celine Flamain, a member of DeutscheÆs trading team in Hong Kong, has been anointed the bankÆs ETF tsar in Asia, and will be responsible for liaising with the investment bankÆs market makers, the lawyers, and marketing and salespeople.
The bank is confident that, after a long period of slow growth, ETFs are going to become as popular among Asian institutions as they are in the US and, more recently, in Europe.
A big catalyst for ETFs to experience heady growth in America and Europe (with compound annual growth rates of 39% and 53%, respectively, at their peaks) was the diversification of these instruments beyond mere equity-index trackers. Deutsche Bank, for example, was the first to introduce credit bond trackers in Europe. Secondly, the number of European and now Asian investors experimenting with ETFs is on the rise, as pension funds and others seek ways to gain exposures with low fees.
ETFs in Asia and Europe have therefore enjoyed growth even as regional and global equity markets have suffered declines (but not in America, simply because they are already so widely used). This year AsiaÆs ETF universe has grown by 5.2%. ôEven when equity markets are falling, there is new money moving into bond ETFs, money-market ETFs and commodity ETFs,ö says Raimar Dieckmann, senior economist in Frankfurt.
As of the end of June 2008, the Asian ETF market had $64 billion of assets under management, of which $36 billion is in Japan. That total is up from $59 billion in January. Trading volumes have also increased across the region, while fund managers and investment banks are listing more products.
Deutsche Bank thinks it can make a splash in this region. Currently the big players are Japanese firms such as Nomura Asset Management and Nikko Asset Management, which dominate the Japanese market; State Street Global Advisors, thanks to the $3.6 billion Hong Kong Tracker Fund; BGIÆs iShares Asia trust, also listed in Hong Kong with $3.4 billion; and Hang Seng Asset Management, which manages $4 billion in Hong Kong- and A-share ETFs.
It believes its swaps-based ETF, in which Deutsche BankÆs on-the-ground trading arms can make markets, provides a much tighter tracking error than is found in traditional ETFs managed by buy-side firms. Lyxor Asset Management, a unit of SG, has already beaten Deutsche to the punch by introducing its own version of swaps-based ETFs in Asia.
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