Sydney-based BetaShares is mulling rolling out exchange-traded funds listed in Hong Kong and Singapore. To be launched as early as next year, these would be the firm’s first outside Australia.
These products will be offered in conjunction with Mirae Asset Global Investments, which owns 50% of BetaShares.
"We are considering other markets [and hope] to have new products by 2014," Alex Vynokur, managing director at BetaShares, tells AsianInvestor. The firm is also considering cross-listing existing ETFs in both Hong Kong and Singapore.
Vynokur met Hong Kong regulators and the exchange last week to discuss ETFs listings and made a similar visit to Singapore last month. He declines to offer more information.
In addition to regulators and exchanges, Vynokur also met institutional investors in Hong Kong to push its existing range of 13 ETFs, which invest in equities, fixed income, currencies and commodities in Australia.
Vynokur claims a desire for diversification has led to an increase in demand from regional institutions – namely insurance firms, hedge funds and private banks – for exposure to Australia.
"As the investment community becomes more and more sophisticated and pays attention not only to local [opportunities] but also regional ones, they are increasingly [eying] Australia," Vynokur says. "Asian investors like the Australian export story. Australia's resources sector gives them a China play without having exposure to mainland corporates [which can be risky]."
Buying Australia-listed ETFs also offers Asian investors carry-trade opportunities – buying these Australian dollar-denominated products essentially means they are short the local Asian currency and long the higher-yielding Aussie dollar.
While demand from Asian institutions seems to be picking up, usage by Australian retail investors has dropped off slightly. Some 47% of Australian retail investors accessed ETFs via a self-managed superannuation fund (SMSF) as of December 2012, down from 50% in December 2011, according to a BetaShares Investment Trends ETF report.
Yet recent regulations that ban financial adviser commission payments could help to boost ETF flows from the local retail community, Vynokur suggests.
Financial advisors in Australia previously received commission for recommending mutual funds to investors, but not ETFs. They therefore lacked the incentive to push ETFs to the retail and institutional community.
However, following Future of Financial Advice (FOFA) reforms, which passed on July 1, financial advisers will no longer receive commission for suggesting mutual funds in Australia.
This puts ETFs "on the same playing field with mutual funds" for the first time, and could in theory lead to more inflows into the Australian ETF universe in upcoming months, Vynokur argues.
BetaShares launched its first ETFs two-and-a-half years ago, and has since increased the ETF AUM to $1 billion.
In addition to bringing BetaShares ETFs to Hong Kong, Mirae Asset Global Investments aims to expand its global ETF business into the US, Latin America and South Asia.