Posted inHong Kong

Hang Seng Investment takes over TraHK tracker fund

The transition is expected to be completed in the third quarter of 2022.
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The trustee of TraHK, State Street Bank, announced to investors this week that Hang Seng Investment Management has replaced State Street Global Advisors Asia (SSGA) as the manager of the $14.25bn Tracker Fund of Hong Kong (TraHK).

The TraHK, Hong Kong’s biggest exchange-traded index fund and the first physical ETF in Asia, was incepted in 1999 to dispose of the government’s equity holdings accumulated through market intervention during the Asian financial crisis in 1998.

In 2021, SSGA faced pressure from Hong Kong officials after it announced it would halt purchases of three Chinese telecommunication companies included in a US sanctioned list.

The decision was reversed a day later, as the city’s leader and former central bank chief warned that SSGA could be replaced by another firm “to safeguard the interests of retail investors”.

Hang Seng Investment Management, a wholly-owned subsidiary of Hang Seng Bank and a Securities and Futures Commission (SFC) licensed investment manager, was selected by TraHK’s supervisory committee during a manager review, the announcement said.

The decision was made in regard of the “relevant experience, expertise and sizable presence in Hong Kong, as demonstrated in part by Hang Seng Investment’s management of several existing SFC-authorized funds and ETFs; latest market developments and TraHK’s future development; and Hang Seng Investment’s fee proposal,” according to the statement.

Established in 1993, the it manages 48 ETFs and retail funds with an AUM of HK$184.2bn ($23.5bn).

Fee reduction

Upon the effective date of the new manager’s appointment, the management fee will be lowered to 0.015% to 0.045% per annum from 0.025% to 0.05% per annum currently.

This will lower the effective management fee of TraHK to 0.022% per annum in the first three years, which represents approximately a 31% reduction when compared with TraHK’s current management fee schedule.

Starting from the fourth year onwards, Hang Seng Investment will further reduce the effective management fee to 0.019% per annum, representing approximately a 40% reduction.

The effective trustee fee of TraHK will also be lowered to the same level as that of the new effective management fee of TraHK on the same day as the new management fee, according to the announcement.

The trustee reassured investors that there will be no change to the investment objective of the fund, and the retirement of the incumbent manager will not take effect until the new manager is appointed.

Part of the Mark Allen Group.