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Maiden ‘active ETF’ launched in Hong Kong

China International Capital Corporation (CICC) has launched Hong Kong's first active ETF.

The actively-managed ICBC CICC USD Money Market ETF was launched in Hong Kong today, according to a document from HKEx.

CICC is the manager of the Hong Kong-domiciled fund and ICBC Asset Management serves as the investment advisor.

ETFs are commonly known as passive investment products, designed to track the performance of an index or benchmark. But actively-managed ETFs have a manager making portfolio allocation decisions and therefore the product will not mirror the underlying index.

Jackie Choy, director of ETF Research in Asia at Morningstar, said there is little difference between the basic investment strategy of active funds and actively-managed ETFs. However, he said active ETFs generally have cheaper fees than mutual funds, which could be an attraction for Hong Kong investors.

For the fund manager, it represents a new distribution channel.

“I think it is a new channel to get more investors,” Choi said. “Before, fund managers needed to find different channels, maybe distributing through five banks [which are dominant in Hong Kong].”

Active ETFs are instead distributed through the stock exchange, enabling the manager to gather assets without intermediaries. There are other benefits as well, such as non-transparency.

The products are still a novelty. At the end of 2018, actively-managed ETFs had $109bn in assets globally, representing a small part of the $5trn in assets of passive ETFs, according to ETFGI data.


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