China Asset Management Company (ChinaAMC) has finalized the acquisition of BMO’s Hong Kong-listed ETFs following the Canadian asset manager’s decision to pull out of the city’s ETF market.
ChinaAMC has acquired BMO’s seven Hong Kong-listed ETFs.
The seven ETFs, which collectively house around HK$4.3 billion ($550 million) in assets, include six equity funds offering Japanese broad market, Asian high dividend, Asian real estate, Hong Kong banking sector, European quality, and Nasdaq 100 exposures.
The largest fund in the suite is its sole fixed income product, the HK$1.8bn ($230m) BMO Asia USD Investment Grade Bond ETF (3141 HK), which provides exposure to US dollar-denominated investment-grade bonds issued by government-related and corporate issuers in the Asia Pacific ex-Japan region.
All seven ETFs have been renamed to bear the ChinaAMC brand.
The acquisition has helped ChinaAMC to diversify its ETF offering as its current product suite in Hong Kong primarily focuses on China’s mainland equity market – the firm’s most recent launches include a Chinese biotech ETF as well as an ETF tracking the innovative Hang Seng TECH Index.
While the BMO ETFs mostly target relatively niche exposures, the funds also provide ChinaAMC with the potential to access a greater share of assets within the Mandatory Provident Fund (MPF), the compulsory pension scheme for Hong Kong residents. The ETFs are on the approved list of index-tracking collective investment schemes that are eligible for investment by the MPF.
While the terms of the acquisition are not public, it is also understood that ChinaAMC managed to scoop the suite at a bargain price that effectively covers BMO’s transaction costs for the deal. The alternative for BMO would have been to liquidate and de-list the funds, a process that can accumulate significant fees.
BMO’s retreat from Hong Kong’s ETF market comes at the same time that Vanguard is similarly dismantling its own ETF suite in the territory. After talks with potential suitors fell through, Vanguard announced it would be liquidating its six ETFs listed on the Stock Exchange of Hong Kong. Trading in the funds was suspended on 10 May.