Active ETF launches stagnate in Singapore #NewsMarket

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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 investing habits of local investors, as well as unresolved gaps in Singapore’s ETF ecosystem and infrastructure, have also damped enthusiasm for the funds, according to industry participants.

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

“It’s just in its infancy now, and firms are trying to figure out what’s my entry point, how much do I have to invest to get in there, who am I selling to, and are we seeing success with the existing products that are out there,” Koudelka said.

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

The Singapore Exchange gave the go-ahead for the listing of active ETFs last December, bringing the city-state into line with other jurisdictions in the region such as Australia, Hong Kong, South Korea, Indonesia and Japan.

Singapore fund house Lion Global Investors subsequently launched the first such product in January in partnership with Japanese manager Nomura Asset Management, raising initial assets of S$37mn ($28.3mn). The Lion Global ETF has seen its assets inch up to S$49.2mn.

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

Rival Asian funds hub Hong Kong has 28 active ETFs, with the first such product listing in June 2019, according to the Hong Kong stock exchange’s website.

Chen Wang, Hong Kong-based deputy chief operating officer at CSOP Asset Management, said asset managers in Singapore were still studying regulatory requirements as well as gauging market appetite.

CSOP AM has a presence across 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 money market products in Hong Kong.

One critical challenge with investors in Singapore is their lack of familiarity with active ETFs.

“Local investors in Singapore, they 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 terms of their investment 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 any 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 fast to launch”, she noted.

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

Evonne Gan, Singapore-based engagement manager for asset management advisory at Broadridge, pointed out that investors in the city-state could access offshore active ETFs via private banking or online securities channels, so just looking at locally listed products did not give the full picture on investor appetite.

Locally listed ETFs in Singapore recorded the highest outflows among all Asia Pacific markets between January and May this year, with cumulative outflows of $278.5mn.

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

The Singapore bourse was “actively engaging” with issuers who had “strong capabilities in originating mutual funds to utilise ETFs as another conduit to reach a wider audience through a listed vehicle”, an SGX Group spokesperson said.

“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.