The offshore arm of Chinese fund house Bosera is to launch RQFII exchange-traded funds in Hong Kong and New York, while it is also in partnership talks with institutions in Europe and the US.
Bosera Asset Management (International)’s global expansion drive comes as it sets out to double the size of its Hong Kong team to 40 through the addition of investment and sales staff.
The firm – the Hong Kong subsidiary of China’s seventh largest asset manager – is set to list the Bosera FTSE China A50 Index exchange-traded fund in Hong Kong on December 9, AsianInvestor can reveal.
The firm received an Rmb2 billion ($328 million) renminbi-denominated qualified foreign institutional investor (RQFII) quota from China’s State Administration of Foreign Exchange in May this year.
This will be the second RQFII A50 ETF listed in Hong Kong, after CSOP launched a dual currency tranche FTSE China A50 ETF of its own in August last year. This product now has Rmb19.6 billion ($3.2 billion) in AUM.
Both of these products are physically backed, unlike iShares’ popular FTSE A50 China Index ETF, a synthetic version that was incepted on November 15, 2004.
The iShares version, which had HK$53.6 billion ($6.9 billion) in assets as at the end of October, was down -9.35% in the year to end-October, compared with +10.4% in 2012.
Nevertheless, David Zhang, deputy CEO of Bosera Asset Management (International), suggests the outlook for China’s stock market next year is much improved from this year, arguing now is a good time to launch an A-share ETF.
“We are positive on Chinese equity market next year,” he tells AsianInvestor. “The Third Plenum [the 18th central committee meeting of the Chinese Communist Party] shows that the government will implement economic reform very soon. We estimate the EPS [earnings per share] growth for A-shares will be 10% next year.”
However, Zhang was at pains to point out that Bosera has no intention of engaging in a price war with existing products. Its ETF has a management fee of 0.99%, and total expense ratio of about 1.19%, compared with a ratio of about 1.15% for CSOP’s A50 product. The iShares equivalent also has a management fee of 0.99%.
Meanwhile, Bosera has also moved to partner US-based fund manager KraneShares to launch the KraneShares Bosera MSCI China A-share ETF on the New York Stock Exchange.
Asked when the product would be listed, Zhang says only “in the very near future”, without giving specifics. “We are in the final stages of preparing and we will list the ETF very soon,” he adds.
In so doing Bosera will join a growing list of Chinese fund houses partnering foreign managers to expand overseas amid increasing competition within Hong Kong’s market for RQFII product.
Bosera Asset Management is also holding talks with institutions from Europe and the US about potential partnerships, with the likelihood that the firm will look to list its ETF on exchanges in Europe. “We are considering the possibility [of a Ucits version of its ETF],” says Zhang.
KraneShares has already accepted indications of interest for the MSCI China A-shares ETF on November 5. The ETF’s annual fund operating expense is 1.1%.
The move comes after Harvest Global Investors and Deutsche Bank Asset & Wealth Management listed the first RQFII ETF on the New York Stock Exchange tracking CSI300 Index, as reported.
Subsequently, the two partners received approval from Luxembourg to bring a Ucits version of the ETF to market, that they plan to list on exchanges across Europe.
On segregated account business, the mandates are mainly QFII mandates from Asia-based sovereign wealth fund and pension funds.
Separately, Zhang notes that Bosera Asset Management (International) is also looking to build up its investment and sales capabilities in Hong Kong.
He confirms it is seeking to double its team from 20 to 40 over the next two-to-three years, adding expertise in both passive and active management and enlarging its sales team to 10 people, from three at present.
One hire it still needs to make is find a replacement as head of sales and marketing to replace Steve Chiu, who quit the firm in November last year.
Bosera Asset Management (International) was among the first batch of houses to receive a renminbi-denominated qualified foreign institutional investor (RQFII) licence back in 2011.
It was subsequently allocated Rmb1.1 billion in quota, which Zhang confirms has yet to be fully utilised.