Ping An of China Asset Management (Hong Kong) plans to introduce as many as four thematic and smart-beta exchange-traded funds (ETFs) this year, adding to the four launched in late 2018, according to CK Chai, its head of capital markets and chief investment officer.
The city’s ETF market has long been dominated by China- and Hong Kong-centric funds but the company would rather focus on thematic and smart-beta products to position its strategies as “systematic, quantitative and scientific” rather than create more broad-based plain vanilla products, Mr. Chai says.
The company, the international investment arm of China’s Ping An Insurance Group, listed four alternative ETFs on the Hong Kong Stock Exchange over the last two months, including the city’s first ETFs tracking artificial intelligence and robotics.
“We’re looking to use a low-cost, highly transparent, repeatable process to develop the strategies,” Mr. Chai says in an interview with Asia Asset Management. “We plan to launch two to four smart-beta and thematic products this year.”
According to Mr. Chai, smart-beta investing has become a “global phenomenon”, particularly as cost conscious institutional investors seek enhanced performance over their benchmarks. Environmental, social and governance is one of the areas the company is looking into, especially with demand from foreign investors for Chinese green bonds, he says.
China is one of the largest green bond issuers in the world. It sold US$13 billion of new green bonds in the first half of 2018, 14% more than in the same period of 2017, according to figures from Climate Bonds Initiative, a London-based environmental advocacy organisation.
“Overall, the underlying themes of our new ETFs is very dependent on the market trend,” Mr. Chai says.
Selection of underlying indexes for funds is important for the company, which prefers to collaborate with index providers that specialise in or are recognised in the areas tracked by its ETFs.
“For example, the China multi-factor and quality factor ETFs we launched last November were benchmarked against MSCI indexes. The products are well accepted by international investors as many know the A-share inclusion into MSCI emerging-market benchmarks last year,” Mr. Chai says.
“Overall, we aim to develop a comprehensive ETF product suite in order to accommodate investment demands from various clients…no matter whether they’re looking for a low-cost pure beta product or seeking an alpha-generation solution,” he adds.
Mr. Chai says Ping An of China Asset Management (Hong Kong) is looking for more third-party clients, including retail investors, for its ETFs. Its insurance parent is currently the major investor in most of the funds. The company made its debut in Hong Kong’s ETF market in 2012 with the launch of three ETFs tracking the benchmark China CSI Index, one of which was delisted in 2016. It currently has six ETFs listed in the city.
Ping An Insurance Group had 6.85 trillion RMB (US$997 billion) of assets as of June 2018. The Hong Kong unit does not disclose its assets data.
Source Asia Asset Management