ChinaAMC Completes Acquisition of BMO’s Hong Kong ETF Line
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ChinaAMC (HK) has completed its buyout of seven BMO Global Asset Management exchange-traded funds in Hong Kong and plans to use this acquisition to increase its market share in the HK $ 1 billion mandatory pension fund (128, 8 billion dollars) of the territory.
Katie He, head of product and strategy for Hong Kong-based ChinaAMC, said the Chinese manager has negotiated a “windfall deal” to take over BMO’s product offerings in Hong Kong.
“It is definitely worth the price for the [business] outlook [they bring]He said, but declined to reveal the exact terms of the deal.
A person familiar with the matter said ChinaAMC paid HK $ 1 million to take over the seven Hong Kong-listed ETFs, an amount that mainly covered the transaction costs of the operation.
The $ 560 million in assets held in the seven ETFs will be added to ChinaAMC’s $ 2.89 billion in ETF assets under management in its 18 Hong Kong-listed ETF and mutual fund strategies , according to Morningstar Direct data at the end of April.
ChinaAMC is currently the fifth-largest ETF provider in Hong Kong, with a 6.67% market share in AUM terms at the end of April. BMO ranked ninth, with 1.3% of the ETF market.
In addition to trying to increase BMO ETF assets, ChinaAMC also plans to diversify its existing ETF product line beyond Greater China, citing increased demand for less common ETFs.
Ignites Asia announced in September that BMO GAM plans to pull out of the Hong Kong ETF market after years of struggling to achieve growth, despite a huge increase in wealth in the territory.
BMO’s product line was primarily focused outside of China.
While in theory the acquisition could help increase ChinaAMC’s assets in Hong Kong, some BMO funds may be too small to attract institutional investors, said Jackie Choy, head of ETF research for Asia. at Morningstar, based in Hong Kong.
One of the ETFs only has $ 7 million in assets under management while another has an even smaller $ 1 million. “These would be quite small and quite difficult to break into the institutional space also due to the small size of the fund,” Choy said.
However, ChinaAMC said there are good prospects for business growth given that BMO ETFs are among 138 approved index-based collective investment schemes (Itcis) that are used by MPF, the default group retirement scheme. of the territory.
“We are very reassured about it, they made a very good strategic decision,” He said.
The fact that the investment exposures of these seven ETFs are not the most widely used or the most popular in the MPF could limit their use.
“The purchase gives them exposure to the MPF thanks to the fact that the funds are approved by Itcis, but they are also exposed to non-core areas of [the] MPF, ”said Francis Chung, founder of Hong Kong-based MPF Ratings.
Other Itcis also cover some of the same markets as BMO GAM’s ETFs. BlackRock, for example, has at least a dozen iShares ETFs dedicated to investing in countries around the world, some of which have the same exposure that ChinaAMC has now acquired.
ChinaAMC declined to disclose which MPF Trustees are currently using the ETFs it and BMO GAM manage.
Daniel Mak, Hong Kong-based vice president of business development for ChinaAMC, said the BMO Nasdaq 100 ETF has seen “substantial growth” over the past month, which may suggest some MPF flows have been directed there. .
ChinaAMC said it would not change the scope of the investment or the operation of the seven BMO ETFs, which was a “premise” of the transaction.
It was “less complicated” to complete this acquisition of new ETFs compared to developing a similar product line, according to Mak of ChinaAMC.
Closing the deal means ChinaAMC has immediate access to clients of BMO GAM’s ETFs so that the manager can also “cross-sell” among different client bases, he added.
* 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.