Mirae Asset HK ETFs questioned as Lui exits
Mirae Asset Global Investments saw its Hong Kong head of exchange-traded funds leave last week, as industry observers raise questions over the viability of some of its ETFs listed in the city. But the firm, the international arm of Korea's Mirae Asset, says it is planning more products and hires.
Laura Lui left the post last month and has been replaced by Carmen Cheung, ETF sales and capital market director for Hong Kong, who retains her former responsibilities. Lui said she will start in a new role elsewhere in November, but declined to disclose further details.
Seven of Mirae Asset’s 11 ETFs in Hong Kong – under the Horizons brand – are well below the $100 million in AUM typically seen as a minimum profitable size.
Several firms have delisted ETFs in the city in recent years – notably HSBC in 2013 and Lyxor in late 2011 – as the industry has shaken out, often as a result of low AUM and/or trading volumes.
Industry observers point in particular to Mirae's sector ETFs, which account for five of its 10 Hong Kong ETFs. The biggest of those five – which track the energy, financials, industrials, IT and materials sectors across Asia – had AUM of just HK$28.4 million ($3.7 million) as of October 16.
One ETF specialist said Beijing’s suspension of certain stocks over the summer had reduced the appeal of sector-focused products.
In addition, he argued, region-wide sector ETFs have failed to take off in Asia or Europe because sector dynamics are different in each country. For example, a chemicals producer in one jurisdiction receives different tax treatment than its peers in other countries. In short, industry fundamentals can be overwhelmed by other factors.
Demand has been more robust for sector-focused ETFs in large homogeneous markets such as China and US.
Asked about the long-term viability of Asian sector ETFs, Mirae Asset’s Cheung said: “We have seen sector ETFs being reasonably successful in more mature markets, especially in the US. We see the potential of sector ETF products which help investor diversify their portfolios – to that end, we will continue to market our products and conduct investor education activities.”
Mirae Asset said it was planning to expand the Hong Kong ETF team, but did not give an indication of target numbers or time frame. The headcount expansion is understood to be subject to regulatory approvals for new products.
Meanwhile, Mirae Asset GI has boosted its institutional coverage in Asia Pacific and was set to launch two mutual funds and a hedge fund in a drive to expand its footprint, as reported this month.
The firm listed its first ETF in Hong Kong – tracking Korea’s Kospi 200 index – in January 2011. That was followed up with the five sector ETFs – plus an emerging Asia consumer ETF and a global consumer brand ETF – in January 2012.
A further two ETFs – the Horizons Hang Seng High Dividend Yield ETF and Horizons MSCI China ETF – listed in June 2013, following the hire of Lui and Cheung from RBS earlier that year.
The latter two ETFs have the highest AUM among Mirae Asset’s 10 Hong Kong-listed ETFs. The Hang Seng High Dividend product had HK$321.6 million and the MSCI China ETF HK$259.8 million as of October 15.
That is still well below the AUM for Mirae Asset’s Korea-listed China trackers. For example, the Mirae’s Tiger China A Leverage ETF has W269.9 billion ($239 million) in assets, and its Tiger China A300 ETF has W98.3 billion.