Product innovation will be key to the drive growth of exchange-traded funds in Asia Pacific over the next few years, asset managers and index providers said at a recent panel discussion in Hong Kong.
Meaghan Victor, head of intermediary client coverage, Asia Pacific at State Street Global Advisors, noted that the region has seen the popularity of innovative ETFs grow in recent years.
As an example, she pointed to the success of leveraged and inverse products in Hong Kong, which she said are “in style” to meet the specific needs of investors.
“An ETF was born out of crisis. It’s an innovation in itself. I think that’s something that is going to continue into the future,” she said at the panel discussion organised by Asia Asset Management on April 11.
Sue Lee, director and Asia Pacific head of index investment strategy at S&P Dow Jones Indices, highlighted options-based ETFs as one of the most popular innovative products in South Korea.
She said S&P worked with several asset managers to launch Korea’s first option ETF, which uses zero days to expiry options to diversify income sources for investors.
“These ETFs are very popular among retail investors to meet the need for steady income,” she said.
According to Carmen Cheung, head of products at Hong Kong’s Hang Seng Investment Management, the city’s Securities and Futures Commission has made the approval process for innovative products such as leveraged and inverse futures exchange-traded products more efficient.
It took several years for ETF managers to convince the financial regulator to agree to innovative products, but she said the market development has since been “phenomenal”, with a broad product line-up across leveraged and inverse futures ETPs and virtual asset ETFs.
Tom Digby, head of ETF business development and capital markets, Asia Pacific at Invesco, expects active ETFs to gain more traction in Asia Pacific.
“It’s not a new thing. But it should be demanded by clients more frequently,” he said, pointing out that Invesco has had active ETFs since 2006.
He expects the launch of active ETFs in Taiwan recently to lead to better understanding of their advantages, such as liquidity and accessibility, among investors.