In 2011, Mirae acquired Canada’s Horizons ETF Management, which also includes the ETF business in Australia under the brand Betashares.
“For this year and next year, we will probably focus on growing the Horizons ETF platforms in Hong Kong and the US,” Toronto-based Lee told FSA during a recent trip to the SAR.
“Hong Kong is a gateway to Asia, not just to China.”
In the US, where it manages Horizons ETFs, Lee sees great potential due to huge investor demand, as well as a highly competitive and crowded market that is difficult to crack.
Hong Kong is also challenging due to the dominant commission-based wealth management model as well as lack of market education. “Asia is still playing a catchup,” he said.
Lee said product evolution and regulatory initiatives are essential for ETF development. The recent Hong Kong launch of leverage and inverse ETFs that track local indices are critical to domestic market development, he said.
The next step is for regulators to promote transparency on investment products, which will support the use of ETFs, he continued.
Managing global ETFs
Mirae differentiates its ETF business from rivals by being an Asia-based manager, Lee said, adding that it is uncommon for an Asia-based asset manager to operate a global ETF business due to varying languages and regulatory practices.
“In terms of product differentiation, we’ve been focusing on income products in the past few years. We are not competing with Vanguard, iShares or State Street.”
Using Hong Kong as an ETF hub, the firm plans to develop new Asia-related ETFs, as well as bringing global products into Asia. Within Asia, Mirae is considering tapping into ETF market in Singapore, Vietnam, Thailand and Indonesia.
Within developed markets, the focus is more Asia-focused products to Canada, the US and Australia. It is also evaluating Europe. “We believe we will have extended ETF business coverage by the end of the year.”
“We are constantly looking for partnerships, organic growth and M&A opportunities. We are also looking into different niche markets where we can become the first mover in issuing ETFs.”
Lee acknowledged that home bias is a common phenomenon and challenge in almost all markets.
“When we started to talk about Asia products in Canada, nobody listened to me for the first three years. It took us three years to launch a China high dividend ETF on the Toronto Stock Exchange.”
Still, Lee called Canada, as well as Australia, the “sweet spots” for ETF growth, as they already have a sizable investment industry but relatively small scale of ETF assets compared to the US and Europe. The two markets also have undergone regulatory changes that favour ETFs.
In Australia, the size of the ETF market has been growing by about 30% annually the past three years, he added.
Mirae’s ETF business now has $13.6bn in AUM, according to the firm. It has 217 ETFs in six regions – South Korea, Australia, Hong Kong, Canada, the US and Columbia. The latter four markets use the Horizons ETF brand name.
It has listed 16 ETFs in Hong Kong, including eight leveraged and inverse products.
