Vanguard Group, an American investment management company, has received regulatory approval to launch the first Hong Kong-domiciled exchange traded fund (ETF).
The physical-backed Vanguard FTSE Asia ex Japan Index ETF will offer investors broad diversification with exposure to large and mid-capitalisation stocks in 11 Asian countries.
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The ETF displays a total expense ratio (TER) of 0.38%, which is considerably lower than the average expense ratio of 0.62% for Hong Kong, and far lower than the CSOP FTSE China A50 ETF’s 1.15%.
The Vanguard offering still trails the government-run Hong Kong Tracker Fund, which is estimated to be no more than 0.15%. As of the end of March, the underlying index invested in 766 stocks, with China (22%), Korea (19%), and Hong Kong (15%) comprising its largest allocations.
Vanguard Asia regional managing director, Shelly Painter, said: "The Vanguard FTSE Asia ex Japan Index ETF represents our first locally domiciled product offering and, together with the official launch of our intermediary business in Hong Kong, demonstrates our commitment to building Vanguard’s presence in Asia.
"As intermediaries and their clients learn more about ETFs, how they are bought and sold, how they are designed and how to incorporate them into investment portfolios, we believe that we will continue to see increased adoption of ETFs across Asia."
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By GlobalDataVanguard International managing director, James Norris, said: "Since the global financial crisis in 2008, investors worldwide have become more focused on broad diversification, low investment costs and transparency – which are the key characteristics of index funds and index ETFs.
"From 2007-2012, Morningstar data shows that worldwide index-based product assets experienced a 27% annual growth rate, compared to a 4% growth rate for non-index products.
"In particular, the benefits of ETFs certainly haven’t been lost on investors in Asia. At the end of October 2012, the region had 402 ETFs with USD 77 billion in assets. That was up from 73 ETFs and USD 28 billion in assets just five years before," Norris said.
