Scale is key for any exchange-traded funds business, and being an early mover can be a contributing factor in this regard; a strong brand and differentiated products also help.
UBS Global Asset Management clearly has the name and the product expertise to potentially set it apart from rival providers – but it is lagging on the first two counts, particularly in Asia. The Swiss firm is well behind the biggest ETF providers – the likes of iShares and State Street Global Advisors (SSgA) – in terms of the size of that business.
It faces an uphill battle given the dominance of those players, rising competition and the fragmented nature of the Asian markets.
Nonetheless, UBS Global AM has hired a veteran of Asia’s ETF industry to build out its business in the region. Sammy Yip, previously of Lippo Investments Management and SSgA, started on Monday (August 26) in Hong Kong as head of ETF sales.
UBS does not have ETFs listed in Hong Kong or Singapore, so it will presumably, at least initially, market its funds listed elsewhere to institutions in those and other markets. The firm has $13.3 billion in ETF assets globally, listed in Australia, Germany, Italy, Switzerland and the UK – and in Korea through joint venture UBS Hana Asset Management.
Some suggest that the proposed China-Hong Kong mutual-recognition scheme for funds may also offer opportunities.
UBS declined to comment on Yip's appointment or its plans. Lippo IM could not be reached for comment on whether he has been or will be replaced.
One Hong Kong-based industry veteran at another bank says: “Sammy is one of the most knowledgeable and experienced ETF specialists in Hong Kong. He has a very good track record and is well respected by the market. This a very good acquisition as far as UBS is concerned.
“What will they be doing is the big question,” he adds. “Do they intend to bring their range of funds in Europe to this market? Cross listing is quite difficult, but perhaps they will domicile ETFs in Hong Kong."
But retail interest in ETFs in Hong Kong remains “negligible”, he adds, suggesting that as much as 90% of ETF AUM in the city is institutional money. “So there’s no great need to get them listed and authorised here.
“It may be that UBS will do something RQFII- or China-related.” He refers to the renminbi qualified foreign institutional investor scheme, whereby RQFII quota holders can invest in onshore securities such as China A-shares and bonds.
The Swiss firm may not have an ETF sales presence in Asia, adds the executive, but UBS as a bank is one of the biggest players in terms of ETF market-making in the region.
Yet it’s difficult to build scale in ETFs listed in Asia, given its fragmented markets and the fact that these products haven’t gained much traction among retail investors there. Institutions in Asia buy mostly US-listed ETFs, because it is the most liquid market globally. Estimates suggest some 80% of Asian institutional assets invested in ETFs is in US listings.
Before joining UBS, Yip had been head of business and product development at Hong Kong-based Lippo Investments Management since April 2010. There he was in charge of developing fund-of-ETF and ETF products listed in Hong Kong and of sales and marketing.
Prior to that, he worked for State Street for 11 years in Hong Kong, most recently as Asia-Pacific head of ETFs at SSgA, a post he held for four years. As such, he was also in charge of sales, marketing, distribution and promotion ETF. Yip also served as Asia ex-Japan head of global structured products, as well as principal and portfolio manager, at SSgA.
He also provided trustee, custodian and fund administration services on ETFs and investment funds/portfolios at State Street Bank and Trust Company for two years.