JPMorgan AM to join China ‘fundraising war’ for CSI A50 ETFs

JPMorgan Asset Management’s China retail asset management subsidiary will go head to head with about half a dozen top local fund houses after the Lunar New Year holiday to raise money for exchange traded funds that track a newly established index.

The move marks the first time a wholly foreign-owned enterprise will compete directly with domestic fund giants in a co-ordinated fund launch for identical products. It also comes amid red-hot investor interest in ETFs and could become a “fundraising war”, one manager suggested.

Six firms will begin first-round funding for their CSI A50 ETFs on February 19, after the Spring Festival in mainland China which falls between February 10 and 17, according to regulatory filings posted on the China Securities Regulatory Commission website. The fundraising efforts are scheduled to wrap up on March 1.

The managers include Fullgoal Fund Management, Yinhua Fund Management, Dacheng Fund Management, Hwabao WP Fund Management, Ping An Fund Management and JPMorgan Asset Management (China).

This article was previously published by Ignites Asia, a title owned by the FT Group.

The announcements come days after 10 leading asset managers, including E Fund Management, Harvest Fund Management, ICBC Credit Suisse Asset Management and Huatai-PineBridge Fund Management, received regulatory approval to roll out the same products on February 2.

When fundraising begins, JPMAM’s new wholly owned entity, which it only secured just over a year ago, will go up against many of China’s largest ETF providers.

Among the firms that have applied to launch the new CSI A50 ETFs, E Fund has more than Rmb275bn ($38.65bn) across its 75 ETFs, Huatai-PineBridge FM manages nearly Rmb210bn, while Hwabao WP FM has more than Rmb150bn in assets in 27 ETFs.

In contrast, JPMAM (China), a newcomer and relative minnow in the sector, oversees just over Rmb2bn in ETF assets in seven products.

China Asset Management is the country’s largest ETF provider, managing around Rmb412bn across 87 ETF portfolios, but has not applied to launch a new CSI A50 ETF.

The applications reached the securities regulator’s desk on January 2, the same date that the underlying CSI A50 Index also debuted.

The index is the fourth of its kind — after the SSE 50 Index, MSCI China A 50 Connect Index and FTSE China A50 Index — that follows the performance of 50 sector leaders in China and incorporates environmental, social and governance-themed investing, according to the issuer China Securities Index.

The six new products all have an annual management fee of 0.15 per cent and an annual custodian fee of 0.05 per cent, according to the fund sales documents.

The rollout of the new funds could be a game-changer in China’s broad-based ETF market, which attracted record monthly inflows in January as state buyers pledged to buy more shares and authorities ramped up market rescue efforts, according to industry participants.

Researchers at Hwabao WP FM believe the CSI A50 is more balanced in industry allocation compared with existing indices, such as the MSCI China A 50 and SSE 50, and it is designed with ESG and cross-border connectivity considerations.

In terms of weighting, the new index leans more towards the healthcare and new-energy sectors, and features less-hefty financial stocks, compared with current benchmarks.

The CSI A50’s top three constituents include liquor giant Kweichow Moutai, financial group Ping An Insurance and battery maker Contemporary Amperex Technology.

Latest news on ETFs

Visit the ETF Hub to find out more and to explore our in-depth data and comparison tools helping you to understand everything from performance to ESG ratings

Chinese fund houses have often chased after the same new indices and submitted fund proposals simultaneously. With public fund sales off to their worst start to a calendar year since 2017, domestic firms have relied more on ETFs, especially lightweight feeders, to boost volumes.

A total of 43 broad-market ETFs were formally established in the Chinese market last year, raising Rmb35.9bn in initial assets, Wind data shows. Their total assets climbed 8 per cent to Rmb38.8bn by the end of the year.

A large chunk of new capital came from ETF offerings that invest in the tech-focused SSE Star Market 100 Index. Eight such funds have debuted since the gauge went live in August, managing Rmb30.5bn at the end of December.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.