European institutional investors are adopting ETFs as their vehicle of choice for accessing Chinese equities and bonds, according to a survey commissioned by NTree International, a London-based fund marketing and distribution firm.
European institutional investors indicate a clear preference for ETFs when accessing Chinese asset classes.
The survey, which polled 150 institutional investors and wealth managers across Europe with a combined $292.8 billion in assets under management, found that over three-quarters (78%) of respondents expect to increase their use of ETFs to access Chinese asset classes over the next three years.
When asked what factors are driving this preference, two-thirds (67%) said that ETFs deliver specialist and niche exposures to Chinese assets while 60% noted the greater innovation in the ETF marketplace.
Many investors also highlighted ETFs’ traditional benefits with over half (55%) of respondents mentioning competitive costs relative to mutual funds while 54% noted the structure’s liquidity.
Institutional investors are also anticipating greater interest in China’s capital markets with 75% of respondents expecting foreign investment into Chinese equities to increase over the next three years, and 63% expecting an increase in foreign investment into Chinese bonds.
Tim Harvey, CEO at NTree International, commented: “Our research shows the growing demand for Chinese asset classes among institutional investors but also a desire for specialist, innovative products such as ETFs which can provide access at more competitive prices.”
The study was carried out on behalf of NTree client, China Post Global.
China Post Global manages the Market Access suite of ETFs in Europe including the Market Access Stoxx China A Minimum Variance Index UCITS ETF which provides exposure to China’s onshore stock markets while targeting lower total volatility than the market itself.
Launched in June 2018, the fund tracks the Stoxx China A 900 Minimum Variance Unconstrained AM (Accessible Market) Index which comprises Chinese A-shares while implementing an optimized minimum variance approach where eligible stocks are selected and weighted so as to reduce portfolio risk. Sector weights are unconstrained, meaning the index can deliver a purer minimum variance strategy with lower volatility compared to indices that have to maintain similar sector exposures relative to the parent index.
The fund comes with an expense ratio of 0.45% and is listed on London Stock Exchange in pound sterling (M9SV LN), on Xetra in euros (M9SV GY), and on SIX Swiss Exchange in Swiss francs (M9SV SW). Income is accumulated within the portfolio.
Danny Dolan, Director at Market Access, said: “This strong demand for China exposure among European institutional investors is no surprise given the excellent performance of the Chinese equity market since early 2020 and the unparalleled bond yields available in China compared to other major economies. The ever-increasing demand for China ETFs shows the need for innovative solutions that meet investors’ needs, such as our Market Access China Minimum Variance ETF.”