Against a backdrop of tighter rules on and greater scrutiny of exchange-traded funds – particularly of the synthetic variety – an asset manager is set to delist all its ETFs in Hong Kong.
Several sources suggest the firm in question is Lyxor Asset Management, which in recent weeks has seen the departure of Christine Huang, its Hong Kong-based vice-president of sales and marketing for ETFs. AsianInvestor was unable to ascertain her destination by press time.
When asked the reason for her exit, a Lyxor executive would say only that it was “by mutual agreement” and that the firm would now be focusing more on institutional clients in the region. When asked whether it was delisting its ETFs in the territory, he declined to comment.
Lyxor, part of French bank Société Générale, has 12 ETFs listed in Hong Kong, making it the third biggest ETF provider in Hong Kong by number of products after BlackRock’s iShares and Deutsche Bank’s db X-trackers.
One source says the main reason for delisting would be that Lyxor has not achieved sufficient volume in its ETFs in Hong Kong to make it cost-effective to continue running them.
The firm listed its first ETFs in the territory in April 2007, but none of them has achieved the levels of volume or turnover attained by products such as the popular iShares China A50 ETF or State Street Global Advisors’ SPDR Gold Trust.
A further issue is that it has proved impossible in the past year or so to launch new swaps-based ETFs (Lyxor’s funds in Hong Kong are all synthetic). In addition, tighter collateral rules were introduced in September for such funds, making them potentially trickier and more costly to manage. (See AsianInvestor magazine, October 2011, pages 34-35.)
Market participants – such as Frank Henze, regional head of ETFs at SSgA, and Nick Good, regional head of iShares – have in the past suggested a shake-out of ETF providers is on the cards for Asia, and this move to delist appears to support their view.
A source says the firm in question will retain its range of ETFs in Singapore, where the regulator has in the past been more open than Hong Kong to approving synthetic products. That said, a new regulatory framework for the funds industry in the Lion City is unlikely to make the situation any easier for product issuers or sellers there, say market participants.
Lyxor is the second ranked ETF provider in Singapore by product range, with 18 funds listed on Singapore Exchange, behind leader db X-trackers with 43.
“If this [move to delist] is true, it’s a negative move for other issuers and for the industry as a whole,” says a senior Hong Kong-based ETF executive.