French asset manager Amundi yesterday listed an exchange-traded fund in Hong Kong – its first in Asia – with an eye on building a regional ETF business with the city at its hub, but has no plans to launch leveraged and inverse products there.
The new product physically replicates the Hang Seng 35, a concentrated index that excludes Chinese H-shares and red-chips such as e-commerce giant Tencent. The aim of the HSHK 35 fund is to dampen volatility by providing Hong Kong market exposure without the dominance of the large mainland firms, said Yvonne Ng, North Asia head of sales for the ETF, indexing and smart beta division.
The new fund has a total expense ratio (management fee plus transaction and admin fees) of 0.33%, making it one of the cheapest non-cash funds on the market. According to Bloomberg, the average expense ratio for all Hong Kong-listed ETFs is 0.88%.
Amundi started its ETF business in Europe seven years ago, and it now has $22 billion under management and 100 funds listed on European exchanges.
The firm, which initially flagged its Asian intentions last March, plans to launch more ETFs in Hong Kong this year, noted Matthieu Guignard, global head of product development for the ETF, indexing and smart beta division. He said Amundi saw Hong Kong as the hub for Asian ETFs, despite the greater trading activity in markets such as Japan and Korea.
Moreover, Amundi has no plans to introduce leveraged and inverse (L&I) ETFs, despite their success in Japan and Korea and the expectation that they will soon be permitted in Hong Kong, despite regulatory caution.
Zhong Xiaofeng, Amundi’s North Asia chief executive, said: “Those markets have seen strong growth, but in Japan investors are focused on Japanese equities, and in Korea and Taiwan the same. Hong Kong is more open and offers us the chance to sell our European expertise to mainland Chinese investors.”
The firm – which manages $110 billion of its global AUM of $1.1 trillion in Asia – is targeting institutional investors and other asset managers. Zhong said: “We have seen multi-asset funds in Taiwan made up entirely of ETFs. Similarly in Korea, we see core macro asset-allocation funds using ETFs.”
Amundi also plans to tap high-net-worth clients via private bank partners, such as Agricultural Bank of China and Korea’s NH Bank.
Moreover, it sees Hong Kong’s Mandatory Provident Fund scheme as an opportunity, since low-cost and simple products are set to act as the foundation of the new default funds under the MPF scheme from 2017.
Meanwhile, in the wholesale market, Zhong said Amundi had long-standing relationships with distributors selling funds of ETFs.