Ray Chan joined State Street Global Advisors (SSgA) earlier this month as Asia ex-Japan head of business development for its range of SPDR exchange-traded funds.
In a move aimed at strengthening its position as the biggest provider of exchange-traded funds by AUM in the region, SSgA is targeting more ETF sales particularly to fund managers, insurance companies and the private-wealth sector.
In the newly created role, Chan reports to Frank Henze, Asia-Pacific head of ETFs, whose responsibilities had previously incorporated the duties covered by the new post.
Before joining SSgA, Chan was head of the retail business for Greater China at BEA Union Investments, a role he took up two years ago. He also previously held positions with firms including Schroder Investment Management and Capital Group.
As of the end of April, SSgA managed $302.4 billion of ETF assets worldwide, $12.9 billion of which are listed in Asia-Pacific, giving it a 20.5% market share in the region, according to BlackRock figures.
Henze notes that the vast majority (some 80%) of ETFs listed in Asia are still bought by institutions, but he sees the retail market as becoming increasingly important.
Chan will sell both Asia- and US-listed product to clients in the region, since institutional investors can buy overseas-listed ETFs and often prefer to do so, taking the view that they are more liquid instruments.
However, SSgA does plan to list more ETFs in Asia, with an eye on growing demand from retail investors who are more likely to buy locally, Henze tells AsianInvestor. “We are trying to expand our product offering in line with market demand,” he notes, “and there will be more launches during the course of this year.”
He declined to give more details, apart from to say that the new ETFs will cover the whole range of asset classes, including a “deeper fixed-income offering”.
While SSgA has achieved significant scale in a business where large volumes are crucial, many other providers have not – and likely will not – do so. French fund house Lyxor, for example, last year delisted all 12 of its ETFs in Hong Kong, as first reported by AsianInvestor.
Henze believes we will see more of the same, just as he was among those to have predicted a shakeout in the industry months before the Lyxor move.
Asked his view of the debate over the pros and cons of synthetic (swaps-based) versus physically backed ETFs and the concerns over the former, he says: “The debate in the past year has been very helpful, as it has scrutinised the ETF industry, and helped investors to understand there are different types of ETFs that carry different risks.
“It’s fair to say some of these synthetic products have become more transparent and better as a result. But we are still concerned about this [issue] – and we do want to keep ETFs as well understood and as transparent as possible.” (SSgA does not offer any swaps-based products.)
Another area of concern is the level of fees retained by ETF providers from the securities lending they conduct. Has SSgA, for example, been forced to be more transparent over such fees as a result of these concerns about the industry in general?
“SSgA provides a lot of clarity on our lending programmes – we are very concerned about how we conduct it,” he says.
Ultimately securities lending benefits the ETF, adds Henze, as it provides extra revenue that helps offset the cost of the fund, thereby benefiting investors as well as the provider.
Separately, in a US report Greenwich Associates finds institutional investors are increasingly using ETFs for strategic purposes, such as gaining long-term exposures to desired asset classes, rather than simply for manager transitions and rebalancing.
Its study shows that 57% of institutional ETF users employ these products to achieve strategic allocation ranges – a share that includes one-third of asset managers and nearly 60% of institutional funds using ETFs.
“Many institutions consider strategic applications to include liquidity overlays or longer-term over-weights, perhaps to an asset class or a single country, especially if the security is held for more than 12 months,” says Jennifer Litwin, senior director at Greenwich Associates.