Asia Pacific will be the primary growth driver for the global exchange-traded fund market given the relatively low market penetration of ETFs in the region, according to some asset managers.
Phillippe El-Asmar, head of Asia Pacific ETF, digital and direct at J.P. Morgan Asset Management, expects global ETF assets to nearly double from the current US$17 trillion to over $30 trillion in 2030.
“The engine of growth will be Asia Pacific,” he said at a press conference organised by the Hong Kong Investment Funds Association on September 18. “The Asia Pacific [ETF market] is doubling its size every three years compared to every five years for the rest of the world.”
The region accounts for only 12% of global ETFs, underscoring the growth potential, especially within the active segment.
Active ETFs are now only available in a handful of markets in Asia Pacific, such as Australia and South Korea.
Taiwan is the latest to join the group while markets like China are easing regulatory control of the funds. El-Asmar predicts these moves will accelerate the growth of active ETFs in the region.
According to Andy Ng, head of iShares equity product strategy at BlackRock Inc, investors are becoming more attracted to active ETFs because of the innovative product offerings.
For example, fixed income active ETFs now feature target maturity strategies designed to meet specific needs of investors. “Investors primarily benefit from fixed income active ETFs through enhanced transparency and easy access to various [fixed income] asset classes,” Ng said.
Tom Digby, head of ETF business development and capital markets, Asia Pacific at Invesco, highlighted the improving accessibility of ETFs. He noted that the funds have evolved from their origins as passive index tracking tools into versatile asset allocation vehicles, and now encompass a wide range of asset classes including cryptocurrencies.
The potential for ETF development in Hong Kong is significant as the funds only account for 5%-7% of the city’s mutual fund market, according to Heidi Cai, head of international business at the local unit of Beijing-based China Asset Management Co.
Around 60% of Hong Kong-listed ETFs track the China and Hong Kong markets, and Cai said the funds have benefited from growing investor appetite to capitalise on stock market rallies on both sides of the border.
