Hong Kong’s CSOP chases Ark success with China ETF launches
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CSOP Asset Management, one of Hong Kong’s fastest-growing exchange traded fund issuers, has embarked on a product-launching spree to capture the rising demand for thematic exposure to technology companies.
The manager has also set its sights on emulating the popularity of US ETF provider Ark Investment and has taken its cue from founder Cathie Wood’s approach of betting heavily on innovative technology investment themes, but in this case with a focus on Chinese companies.
Ding Chen, chief executive of CSOP, said the manager was quickly expanding its tech-themed ETF line-up, aiming to form a suite of about 10 new ETFs within one to two years.
CSOP has listed 29 ETFs in Hong Kong with a collective $5.64bn in assets, 15 of which were launched in 2020 and 2021.
Covid-19 served as a catalyst and accelerated the transformation of usage of technology in everyday life under the lockdown, which in turn became a driving force behind the strong performance of certain industries, Ding said, adding: “Ark is our teacher; the firm has gone way ahead in the industry . . . We, of course, hope we can build our own characteristics in Asia.”
Wood’s Ark Investments, which shot to prominence last year after benefiting from investments in high-flying tech companies, is the largest thematic fund provider in the US, with $47bn in assets under management as of the end of March.
The company attracted net inflows of $37bn in the 12 months to the end of March, with a sizeable chunk of the new money going into its flagship actively managed Ark Innovation ETF.
During that period, technology-oriented thematic funds represented about 70 per cent of the $160bn US thematic market, according to Morningstar data.
Melody He, CSOP AM’s Hong Kong-based head of business development, believed that with the manager’s understanding of the China market it could offer a “China flavour to spice up the tech investment”.
However, she said the company would retain flexibility in its investment approach. For example, the cloud computing theme includes emerging companies from China but, importantly, also includes US tech giants such as Microsoft and Amazon, which are still the leaders in the industry.
CSOP AM is the Hong Kong-based subsidiary of Guangzhou-based China Southern FM, one of the 10 largest fund companies in the mainland market.
The manager has already launched three ETFs in Hong Kong under a “smart living” theme.
These are the CSOP Yinhua CSI 5G Communications Theme ETF, which was rolled out in August, the CSOP Hang Seng Tech Index ETF, which was listed in October, and most recently the CSOP Global Cloud Computing Technology Index ETF that debuted in May.
The CSOP Hang Seng Tech ETF had garnered more than HK$10bn ($1.29bn) in seven months since its listing to the end of May.
The ETF has become the company’s second-largest Hong Kong-listed ETF, just shy of its CSOP A50 ETF’s $1.54m.
CSOP has also created a green living theme and launched its CSOP Huatai-PineBridge CSI Photovoltaic Industry ETF on June 1. CSOP AM is also planning a new product offering exposure to the electronic vehicle sector.
A third theme will be “healthier living” and include biotechnology ETFs investing in companies dedicated to medical treatment and medicine research.
CSOP AM’s product push in Hong Kong comes after local ETF providers have suffered from prolonged outflows from their flagship ETFs invested in the broader Chinese market.
Ding said the company hoped to use its competitive edge to attract younger investors who might prefer to have greater autonomy directing their own investment choices via transparent ETF tools.
She believed that lack of institutional participation had contributed to the stagnant growth in the Hong Kong ETF market.
“China’s ETF market is catching the US market, and is developing very fast compared to Hong Kong,” Ding said. “But Hong Kong’s individual investors are more active than institutions in utilising ETFs.”
Established in 2008, CSOP AM is majority-owned by China Southern FM, as well as by Oriental Patron Financial Group, a Hong Kong hedge fund manager, and via employee equity ownership programmes.
*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com.