China's largest ETF issuer, China AMC, has taken the lion's share of assets this year. The company eyes smart beta as the next frontier, writes Felix Xu.
China Asset Management Corp, the largest ETF issuer on China's mainland, has gained the largest market share in ETFs in 2017 and has its sights set on smart beta as its next big thing.
China AMC has been one of the best performing ETF managers in China this year, with its ETF AUM reaching a fresh high of 61.5 billion RMB (US$91.5 billion) as of November.
This represents about 30.6% market share of Chinese equity ETFs, beating its major rivals such as China Universal Asset Management and Harvest Fund Management to become the country's largest ETF provider, according to the figures provided by China AMC.
Established in 1998, China AMC is one of the oldest money managers in China. The company began to delve into passive investing in 2005 with the formation of its quant investment division to focus on index tacking, and quantitative asset allocation strategy.
China AMC's suite currently includes 16 equity ETFs (20 if those denominated in two currencies are counted separately) and their feeder funds, and one money market-linked ETF.
The growth for this year was primarily driven by the decent returns from its sector and board market-linked ETF products such as the ChinaAMC SSE Consumer and the ChinaAMC SSE Health Care Sector ETF, says a China AMC spokeswoman.
In terms of performance, 14 of the company's ETFs and their feeder funds delivered returns exceeding 20% in the year to November.
The ChinaAMC SSE Consumer Staples Sector ETF and ChinaAMC Hang Seng Index ETF Feeder Fund were the top performers for the company, with year-to-November returns of 38.64% and 33.35%, respectively.
Also, one of its flagship ETFs--the ChinaAMC CSI 300 Index ETF--is currently the country's largest equity ETF with total AUM of around 18.5 billion RMB.
Compared with other leading ETF providers, China AMC has not been very active in product launches this year. Rather, it has focused on product innovation and exploring the growth potential underlying sectors.
The company plans to launch only one ETF this year, which is designed to track the secondary board of the Shenzhen Stock Exchange or the ChiNext.
ChiNext is the Nasdaq-style board in China that aims to turn local start-up firms into full-fledged companies.
The ChiNext-tracking ETF completed fundraising at the end of November, but the company has not as yet announced the launch date.
Although the ETF industry landscape has become increasingly competitive with 168 ETFs managed issued by 101 fund managers as at November, the spokeswoman says China AMC will press ahead with its ETF development in view of the conducive market condition.
For example, fund of funds (FOFs), which were recently approved for launch by the Chinese regulator, are expected to consider ETFs as an important asset allocation tool because of their high transparency and cost efficiency, according to her.
Also, banks, insurers and qualified domestic institutional investor institutions have not as yet developed a significant position in ETF products, so the market still has room to grow, she says.
In terms of product differentiation, China AMC identifies smart beta ETFs and the products tracking state-owned enterprise sectors as the next focus for its ETF business, she says.
Separately, China AMC's Hong Kong-based subsidiary, China AMC (HK), has also secured significant growth in ETF business this year.
China AMC (HK) ETFs AUM grew 35.7% to US$1.9 billion in the six months to June 30. This accounted for about 25% of the company's total AUM, which rose 20.7% to $6.4 billion over the same period, according to Frederick Chu, senior vice president of business development at China AMC (HK).
China AMC (HK) also plans to introduce Mainland index-linked ETF to Europe market with the growing interest from European investors, says Mr Chu.