Active ETF launches stagnate in Singapore

Stay up to date with free updates

Simply register at Exchange Traded Funds myFT Digest — delivered straight to your inbox.

Nine months after Singapore regulators approved the listing of active exchange-traded funds, the city-state has seen just one product launch, with managers waiting for clearer signs of investor interest.

The more conservative investment habits of local investors, as well as unaddressed gaps in Singapore’s ETF ecosystem and infrastructure, have also dampened enthusiasm for the funds, according to industry participants.

Frank Koudelka, global ETF product specialist at Boston-based State Street, said trying to sell active ETFs in Singapore is likely to be a “mudgeon” at this stage. But as in many new markets for active ETFs, asset managers are still “testing the waters” to see if the products will gain traction.

“It’s just early days, and companies are trying to figure out what is my entry point, how much do I need to invest to get in there, who do I sell to, and do we see success with the existing products that are out there? there,” Koudelka said.

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

Singapore’s stock exchange gave approval to list active ETFs last December, bringing the city-state in line with other jurisdictions in the region such as Australia, Hong Kong, South Korea, Indonesia and Japan.

Singapore-based fund house Lion Global Investors later launched the first such product in January in partnership with Japanese manager Nomura Asset Management, raising $37 million ($28.3 million) in initial assets. The Lion Global ETF saw its assets grow to $49.2 million.

Since then, however, there have been no other active ETF launches in the city-state and no other products in the pipeline, according to the Monetary Authority of Singapore’s website.

The rival Asian fund center in Hong Kong has 28 active ETFs, with the first listing of such products in June 2019, according to the Hong Kong exchange’s website.

Chen Wang, deputy director of operations at CSOP Asset Management in Hong Kong, said Singaporean asset managers are still studying regulatory requirements as well as gauging market appetite.

CSOP AM has a presence in the Singapore and Hong Kong ETF markets, with five ETFs listed in the former and 40 ETFs in the latter. This includes three actively managed Hong Kong money market products.

A critical challenge for Singapore investors is their lack of familiarity with active ETFs.

“Local investors in Singapore still need a lot more time to understand what’s going on because the Singapore market is a relatively smaller market compared to the US or China or even Hong Kong, and investors tend to be relatively conservative in regarding their investments. appetite,” Wang said.

There was still “a lot” of investor education that was needed to show them the difference between active and passive, and then also the benefits of buying an active ETF versus investing in a mutual fund, she added.

Wang did not say whether CSOP AM had active ETFs in the pipeline for Singapore.

If there was a “clear interest in a certain type of ETF” from investors, CSOP AM could “move very quickly to launch,” she noted.

“We are looking at new opportunities in the Singapore market all the time,” she added.

Evonne Gan, Singapore engagement manager for asset management consultancy Broadridge, pointed out that investors in the city-state could access offshore asset ETFs through private banking or online securities channels, so just looking at products listed at local level did not provide a complete picture. on investors’ appetite.

Singapore’s locally listed ETFs saw the highest outflows of any Asia Pacific market in January-May this year, with cumulative outflows of US$278.5 million.

But Gan was still optimistic that domestic interest in active ETFs would grow.

The Singapore bourse “actively engaged” with issuers that had “strong capabilities to create mutual funds to use ETFs as another channel to reach a wider audience through a listed vehicle”, said a SGX Group spokesperson.

“Active ETFs are a relatively new concept in Singapore, reflecting the evolving nature of the investment landscape here,” the spokesperson added.

*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.