Hong Kong Will Get Its First Actively Managed ETF

In Asia, Hong Kong is one of only two markets where exchange-traded fund (ETF) issuers can launch funds that are actively managed. Brown Brothers Harriman & Co. (BBH) has been appointed as the custodian and administrator for the first actively managed ETF that will be domiciled in Hong Kong.

“The ICBC CICC USD Money Market ETF is being launched by China International Capital Corporation (CICC) with ICBC Asset Management (Global) Company Limited acting as Investment Advisor. Brown Brothers Harriman Trustee Services (Hong Kong) Limited serves as trustee and registrar,” according to a statement from BBH officials. “This ETF is the third money market ETF listed on HKEX.”

The ETF will offer a same-day settlement cycle “for all primary market creations and redemptions,” based on BBH, which will be applying its proprietary service model and technology to facilitate to the fund.

“We are excited to launch this first of its kind, actively managed ETF, in Hong Kong,” says Ning Lin, managing director of China International Capital Corporation Hong Kong Asset Management Ltd., in a prepared statement.

May Saw Outflows in Passive and Active Funds

Morningstar, Inc., a leading provider of independent investment research, recently reported estimated U.S. mutual fund and ETF fund flows for May 2019. Overall, passive U.S. equity funds saw $2.7 billion in outflows while active U.S. equity funds lost $12.9 billion to outflows in May–$15.6 billion combined.

With additional funds reporting assets after the April fund flows report published, Morningstar data shows about $89.0 billion between active and passive U.S. equity funds reaching parity. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund, and net flow for U.S. ETFs shares outstanding and reported net assets.

Morningstar’s report about U.S. fund flows for May is available here. Highlights from the report include:

  • Fund flows were weak across the board in May, with long-term funds losing nearly $2.0 billion to outflows, the worst month year-to-date as investors cut risk. Money-market funds saw inflows of $82.0 billion, the group’s second-best month in 10 years.
  • Among category groups, taxable-bond inflows fell from $42.6 billion in April to $15.4 billion in May, the group’s worst showing year-to-date. Overall, credit-oriented high-yield bond and bank loan funds fared worst, losing $5.8 billion and $3.1 billion to outflows, respectively.
  • Among all U.S. fund families, Vanguard led with $16.7 billion in inflows, followed by $5.1 billion from Fidelity; iShares’ flows were flat. At the other end of the spectrum, State Street Global Advisors saw $22.6 billion in outflows, followed by Invesco’s $5.8 billion in outflows.
  • Invesco QQQ Trust, which holds a Morningstar Analyst Rating™ of Neutral, saw outflows of $3.3 billion in May. Conversely, active-oriented American Funds had $2.7 billion in inflows, with much of that demand coming through its target-date lineup.

To view the complete report, please click here.

A volatile May no doubt elicited a risk-off sentiment that permeated throughout the capital markets, causing high-yield bond funds to experience record outflows. Furthermore, with bond market mavens warning investors of headwinds in the fixed income space like the possibility of inverted yield curve, rising rates and BBB debt sliding out of investment-grade, investors need to be keen on where to look for opportunities to hide away when markets head downward.

For more market trends, visit ETF Trends.