CLSA snaps up stake in EIP’s ETF business

03 September 2014   Category: News, Asia, Global, Hong Kong   By Derek Au

CLSA has acquired 49% of Hong Kong-based Enhanced Investment Products Limited’s (EIP) ETF business for an unspecified price.

EIP launched XIE Shares ETFs in 2012, which are based in Hong Kong, offering seven synthetic ETFs which track the indices of seven emerging Asian countries including India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.

The statement said the acquisition of the XIE Shares ETF platform granted CLSA instant access to the ETF market, while EIP could focus on widening its distribution network with the involvement of CLSA and the broker network of the latter’s parent, CITIC Securities.

EIP group’s actively-managed funds, index funds and non-listed beta solutions were excluded from the deal, and will continue to be run by the alpha management team under a new company named EIP Alpha Limited, according to a statement.

“New ETF products are expected to be rolled out under the XIE Shares brand with EIP to launch thematic and sector driven ETFs using CLSA’s proprietary benchmarks in the future,” the statement said. It added that EIP is looking to launch physical ETFs in the future.

Commenting on the acquisition, Jonathan Slone, CLSA’s chairman and chief executive officer said: “As the Hong Kong and China markets continue to liberalise, investing into one of the leading ETF issuers in Asia enables CLSA to diversify its product offering and provide a mechanism for investors to capture the value of CLSA’s index-linked research through thematic ETFs.”

Tobias Bland, CEO at EIP, believes CLSA could help the firm to achieve its goal of being one of the major ETF providers in Asia. “Its exceptional distribution network, particularly in China with CITIC Securities, along with CLSA’s award-winning research capabilities, will allow us to offer our investors varied products and efficient vehicles to express their investment views,” he said.

Services for existing XIE Shares ETFs’ retail investors will not be affected by the deal and the same team will manage the ETF portfolios. The deal will see Xen Gladstone, CLSA’s global head of sales, and Nigel Beattie, CLSA’s managing director, new business and product development, admitted to the board of directors of EIP.

CLSA provides equity broking and execution services, corporate finance and asset management services to corporate and institutional clients. CLSA Capital Partners, its alternative asset management arm with AUM of approximately US$2.6 billion, currently offers six products which invest in real estate, logistics, the clean resources sector, among others.

The acquisition comes as authorities close in on finalising the details of the much-awaited Hong Kong-Mainland China mutual fund recognition scheme. The statement said the mutual recognition of ETFs would fuel the growth of these assets in the region, particularly for Hong Kong and China. It added that collaboration between the two companies would help them to take advantage of the scheme.

Asset managers are hopeful the programme can boost the regional ETF market. Rex Wong, managing director at BNY Mellon’s Asia asset servicing business, earlier said the scheme could “make life easier for ETF promoters and drive product design and development as they expand their footprint in the Asia-Pacific region”. He expects that the Hong Kong and Chinese ETF market will outpace Asia-Pacific regional ETF growth of 15% to 20% annually. The Asia-Pacific ex-Japan ETF market as a whole had $102.7 billion in assets at the end of July, up 11% from the end of last year.