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China's Growing ETF Footprint

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Cinthia Murphy, Managing Editor, ETF.com

In the world of ETFs, Greater China is still a relatively small player, accounting for only 2.1% of the $5.1 trillion in global ETF assets. But the region, comprising three markets—Mainland China, Hong Kong and Taiwan—promises rapid growth ahead, even if ETF adoption still varies significantly by region.

The inside look into how investors are choosing and using ETFs in Greater China comes from Brown Brothers Harriman (BBH), which has co-sponsored with ETF.com a global survey of professional investors, including financial advisors and institutional investors for six consecutive years. The last two years offered a focused look into Greater China.

In a nutshell, the Asia-centered assessment of ETF usage found that drivers of adoption are unique to each market, but Mainland China is the engine driving that growth.

ETF Selection Not Centered On Cost

Another interesting find this year is on how investors in different parts of the region are choosing ETFs. The selection process is anything but uniform when it comes to what matters most to investors.

Types Of ETFs In Demand

Investors surveyed looking to expand their ETF usage said their wish list of funds includes more smart-beta funds, more actively managed ETFs, as well as more ESG (environmental, social, governance) and core index ETFs. From an asset class perspective, they also want more fixed income and U.S. equity ETFs.

Outlook

While challenges persist, the outlook for the ETF market in Greater China is positive thanks in part to ongoing education efforts, as well as to an ETF-friendlier regulatory landscape, encouraging product innovation and improved access across the region.

“Despite 2018’s market volatility, ETF AUM [assets under management] for these three markets grew 18%, from $92 billion to $108 billion,” the survey found. “This year’s results tell a similar story: The Greater China region continues to embrace ETFs and product innovation will accelerate growth.”

Zero-Fee Funds Debut

The past week was a whirlwind of activity, with nine launches and the news that Precidian’s long-awaited nontransparent active ETF structure had been approved by the SEC. Launches for the week included a family of five leveraged and inverse ETNs targeting a narrow-based oil company index, two ETFs with waivers that bring their expense ratios to zero and the first ETF focused on space.

Below is a roundup of the key events in the ETF industry for the week ended April 12, 2019:

SoFi Launches Zero-Expense-Ratio ETFs

Personal finance company SoFi entered the ETF space with the launch of two growth-oriented ETFs targeting the large- and midcap segments of the U.S. market. The two funds have expense ratios of 0.19% each, but they also have fee waivers that bring that fee down to zero through June 30, 2020. (Read: Newcomer Rolls Out Zero-Fee ETFs)

First Space Fund Takes Off

Procure ETFs, co-founded by Andrew Chanin and Bob Tull, just launched its first fund, the first ETF to cover companies that derive significant revenues from business activities related to space, such as satellite-based technologies and space travel. (Read: 1st Space ETF Lifts Off)

REX Debuts Oil MicroSectors ETNs

REX Shares partnered with the Bank of Montreal to launch a family of five leveraged and inverse ETNs focused on the “big oil” space. The ETNs are all tied to the same narrow-based 10-stock index. REX has previously launched two other sets of MicroSectors ETNs targeting FAANG-related securities and big banks. (Read: New Targeted Sector ETNs Debut)

Nontransparent ETFs Coming

After almost a decade’s worth of anticipation, Precidian’s proposed structure for nontransparent actively managed ETFs has been approved by the SEC. The structure has already been licensed by nine major financial companies. (Read: Nontransparent ETF Structure Approved)

Global X Debuts Genomics Fund

An ETF offering pure-play exposure to the biotechnology and genomics space made its debut from Global X this week. The fund tracks an index of 40 holdings that are partially selected using a natural language processing algorithm. (Read: Genomics & Biotech ETF Launches)

iShares Adds Target-Maturity Muni ETF

BlackRock’s iShares arm has added another ETF to its iBonds family of target-maturity bond funds. The firm is in the middle of a major expansion of its iBonds line of ETFs that focuses on the municipal bond space. As of the most recent launch, the lineup now covers ETFs of bonds maturing in the years 2019 through 2027. (Read: iShares Continues iBonds ETF Expansion)

Contact Cinthia Murphy at cmurphy@etf.com

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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