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Asia investors’ ETF appetite growing

Asian institutional investors plan to further raise exposure to passive products over the next year, according to a survey by Deutsche Asset & Wealth Management.

Expert Investor


Francis Nikolai Acosta

About 70% of respondents said they had invested in ETFs compared to 55%, five years ago.

Encouragingly, almost two thirds of respondents from a sample of 100 said they plan to increase their ETF exposure over the next year.

The increasing interest toward ETFs gets reflected in the growth in assets under management, too. Over a five-year period until June, Asia-listed ETFs have seen a 174% growth in AUM to $234.6bn, according to the firm. The AUM is up 16% since the beginning of the year until June.

Developed market equity (24.5%), emerging markets ex-China A-shares (20.2%) and China A-shares (17.6%) were the most favored type of ETFs.

The firm believes ETFs could get traction from the mutual recognition of funds initiative and further momentum when the Asia Region Funds Passporting scheme launches next year.

“[These initiatives could] add further momentum to the intra-regional funds industry, which should also benefit ETF volumes in the coming years as it becomes easier to list ETFs across borders,” said the firm.

Toby Bland, chief executive of Enhanced Investment Products in Hong Kong expressed similar views recently and said the MRF initiative will eventually result in a wave of ETF houses bringing products to Hong Kong.

Also, the Deutsche survey showed there is a growing appetite for smart beta ETFs, which select and weigh securities based on factors that have outperformed the market. 

Smart beta products have captured more attention from respondents, said Sam Manchanda, head of Southeast Asia for passive investments at Deutsche.

Wealthy Asia clients use few ETFs, but over the next five years acceptance of the passive products will grow, Roger Bacon, Asia-Pacific head of managed investments at Citi Private Bank, told Fund Selector Asia.

A recent Cerulli study predicted ETFs will become core holdings among distributors in the region and they are likely to have two fund lists, one for passive and one for active products.

A look at the one-year performance of top performing ETFs with a three-year track record and available for sale in Singapore and/or Hong Kong.