Industry Updates

BlackRock to fully replicate China A-Shares ETF

The strategy will better align with clients’ portfolio construction needs

Lauren Gibbons

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BlackRock is set to fully replicate the underlying index of its $2bn China A-Shares ETF to better meet investors' portfolio construction needs. 

It comes as the world’s largest asset manager said it recognised the iShares MSCI China A UCITS ETF (CNYA) as a portfolio “building block” for MSCI emerging market investors.

It added CNYA will become fully replicated “on or around” 20 February, subject to the approval from the Central Bank of Ireland.

In a shareholder notice, BlackRock said: “The company’s investment manager is aware that the fund is often purchased by clients to be used as a building block for MSCI Emerging Markets investors.

“The investment manager has endeavoured to follow a fully replicating approach, and no longer feels there is a need for the flexibility of an optimising strategy.”

Under an optimised strategy, an ETF will aim to mirror the index as closely as possible without tracking the entire index. 

A full replication strategy means that CNYA will track all the securities that make up the index.

BlackRock made similar changes to several of its ETFs last year to avoid tracking error.

These included the iShares MSCI USA ESG Screened UCITS ETF (SDUS), the iShares MSCI EM ESG Enhanced UCITS ETF (EDG2) and the iShares Digital Entertainment and Education UCITS ETF (PLAY).

State Street Global Advisors also made the swtich on several ETFs last month, when the firm decided to fully replicate the underlying index of the SPDR MSCI EM Asia UCITS ETF (EMAD), the SPDR MSCI Emerging Markets UCITS ETF (EMRD) and the SPDR S&P Emerging Markets Dividend Aristocrats UCITS ETF (EDVD).

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