EMQQ Global has partnered with a Hong Kong firm to launch the Value Partners EMQQ Emerging Markets Internet & Ecommerce ETF. The ETF will track the same EMQQ Index that investors access on the NYSE and London Stock Exchange, focusing on leading technology companies driving the growth of online consumption in emerging and frontier markets. Its holdings include not only China internet leaders such as Alibaba, Tencent and JD, but also companies such as Latin America’s Mercado Libre ecommerce group, India’s PAYTM and Singapore-based gaming and payments company, SEA. Value Partners serves as the investment adviser and EMQQ Global serves as the administrator of the fund and the index provider.
The launch marks Value Partners’ first Hong Kong ETF debut in seven years. The company last launched a Hong Kong-listed ETF in 2015, focusing on China A-shares, but delisted that product in December 2020 as the strategy failed to attract sufficient investor interest. Its only other existing locally listed ETF is the Value Gold ETF, which was launched in 2010 and has assets under management of HK$1.68bn ($214.2mn), data show. The new product offering marks a renewed push into the passive investment space after a difficult few years for the Hong Kong-listed manager.
Value Partners suffered a 29.1 per cent drop in assets under management to $10.04bn in 2021, including redemptions of $3.01bn, alongside sharp declines in profits and performance fees amid “challenging” market conditions in Asia, particularly in China. In the first half of the year, its business has continued to spiral downwards, with assets dropping further to $7.5bn with $700mn in net outflows. In mid-July, the firm issued a profit warning after announcing HK$435mn in expected consolidated losses. To try to boost its position in Hong Kong’s passives market, Value Partners has hired a number of ETF veterans.
Kim Hyundo, head of ETF business at Value Partners, joined the fund house in March this year from CSOP Asset Management, a dominant participant in terms of flows in the Hong Kong ETF market. The group also appointed June Wong as its new chief executive earlier this month after she joined as group president last year. She became Value Partners’ first chief since 2019 after the departure of Au King Lun. Hong Kong’s ETF market recorded net inflows of HK$80bn last year, double the previous year’s total of HK$40bn .
Value Partners is better known among investors for its active investment strategies and Kim acknowledges that this fact could prove a challenge when selling the product to retail investors. Quantitative funds and ETF strategies accounted for just 2 per cent of Value Partners’ total assets of more than $10bn at the end of 2021, compared with its absolute return long-biased funds, which accounted for 71 per cent of the company’s assets. Retail clients make up 40 per cent of its investor base, followed by 27 per cent in institutions and 18 per cent in wealthy individuals, its annual 2021 financials show.
Kim said new schemes, such as the ETF Connect between Hong Kong and China, could provide opportunities for different participants, but the new EMQQ Emerging Markets Internet & Ecommerce ETF would have to reach assets of HK$1.7bn over a six-month period before it was eligible for inclusion. Instead, there could potentially be opportunities in the cross-listing scheme, in which Hong Kong managers and Chinese managers partner to launch a locally listed ETF feeding into the partner manager’s product in each other’s corresponding markets.
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