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Canada’s BMO to sell Hong Kong ETFs to China AMC, source says

By Hui Ching-hoo   
September 15, 2020

Canada’s BMO Global Asset Management is pulling out of Hong Kong’s exchange-traded fund (ETF) market and selling its seven funds listed in the city to the local unit of Beijing-based China Asset Management Corp, according to a person familiar with the matter.

BMO has signed a deal to sell the ETFs, which have US$350 million of total assets, to China AMC (Hong Kong) for an unspecified sum, the person tells Asia Asset Management (AAM).

The person says another Canadian fund manager, Mackenzie Investments, which is a major shareholder in China Asset Management Corp, will become a sub-adviser for the ETFs.

According to the person, the deal is expected to “bring significant synergy effect to China AMC” and diversify its product range because there is no overlap between its ETFs and the BMO funds.

“The ETF disposal is also a more cost-saving way for BMO to exit the Hong Kong market compared to delisting, which involves a lot of transaction costs,” the person adds.

Most of BMO’s Hong Kong ETFs are focused on US and Asia Pacific stocks, whereas China AMC’s 14 passive funds are mostly focused on Mainland stocks.

Spokespersons for China AMC and BMO did not immediately respond to questions from AAM.

BMO’s move comes three weeks after US asset manager Vanguard Group Inc. unveiled plans to exit its six Hong Kong-listed ETFs within two years as it moves its Asian headquarters from the city to Shanghai.

But BMO, unlike Vanguard, isn’t exiting Hong Kong, only the ETF market.

The Canadian company has private banking and mutual fund businesses in Hong Kong and only entered the ETF market in 2014.

Some ETF managers in the city are facing strong headwinds amid market volatility triggered by the coronavirus crisis, according to Jackie Choy, director of Asia ETF at US investment consultancy Morningstar.

“It’s [the right] timing for the managers to reassess their business strategies. Some decide whether they should stay or leave,” Mr. Choy tells AAM.

Toronto-based BMO had $45 billion of total assets under management globally as of April 2020.

China AMC currently has $7 billion of assets, and China Asset Management Corp had $198.6 billion of assets as of June 2020.