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Fostering Innovation in the ETF Landscape


FOSTERING INNOVATION IN THE ETF LANDSCAPE

ray-chan

Ray Chan
Head of SPDR ETFs, Hong Kong
State Street Global Advisors

Launching the first US-listed ETF in 1993, State Street Global Advisors, also this year’s winner of the House Award in the Physical ETF category, bestowed a key building block of portfolio construction unto the investment world. After twenty-five years, ETFs have taken on many new shapes, but their core objective remains the same: to provide investors with a simple, transparent, and cost-effective way to invest. At this important juncture, Ray Chan, Head of SPDR ETFs, Hong Kong, looked at the past and future of ETFs and shared investment tips with investors.

BENCHMARK (BM): Congratulations on the well-deserved win. On the 25th anniversary of ETF, in what ways do you think this product has innovated the investment arena?
Ray Chan (RC): Thank you, we’re glad to celebrate the quarter-century anniversary of ETFs with this meaningful win. Ever since we launched the first US-listed ETF, the ETF industry has been growing, boasting a size of 6,700 ETFs globally with US$4.7 trillion in assets as of November 30, 2017. Looking back at the evolution of ETFs, we believe a lot of innovations are investor driven – for example, insurance companies using ETFs to invest for their general accounts because of ETFs’ inherent liquidity advantages over individual bonds, financial advisors using ETFs for asset allocation and diversification planning, or a number of wealth management firms using ETFs to package their investment beliefs into outcome-oriented products for their clients.
ETFs even help mutual funds innovate. Before ETFs, a US$100 million inflow into a mutual fund would mean the portfolio manager had no choice but to either leave it in cash or sweep it into a money market fund. Now that money can be put to work in an ETF that achieves similar exposure and is aligned with the fund’s objective.
BM: The development of ETFs has certainly gone a long way. What is your view on how the ETF market will evolve going forward?
RC: Looking ahead, as investors’ needs evolve, we expect to see more innovative ETF applications. For example, ETFs now allow investors to target specific opportunities or to slice deeper into asset classes. In 2016, we successfully launched an ETF in the US that seeks to invest in the US companies with the highest levels, within their sectors, of gender diversity on their boards of directors and in their senior leadership. This ETF not only allows investors to capture potential returns from gender diverse companies but also to use their capital to encourage social change.
Regarding geography, we believe there’s tremendous room for growth in Asia, as penetration is still relatively low compared to the US. For example, there are more middle-class Chinese citizens than there are American citizens in total. ETFs are just scratching the surface in these markets. New initiatives, such as the ETF Connect, will help encourage ETF investing, while Robo advisors can be potential partners for wider ETF distribution. Given ETFs’ versatility, we believe there are plenty of new applications and innovations still to come in Asia.
BM: Although ETFs are growing in Asia, they are still relatively new to many retail investors. Can you advise them on how they can use ETFs in their portfolios? What factors should they look at?
RC: Surely. ETFs are highly flexible investment vehicles that can play a variety of roles in any investor’s portfolio. They can be used to build a low-cost, diversified core holding to complement an investor’s single-stock holdings, active funds, or other investments. This is also called a “core-satellite strategy.” Investors can also use ETFs for tactical asset allocation or to pursue sectors or asset classes that they believe will increase portfolio returns.
Like with any other investment, investors should always look under the hood. Not all ETFs are created equal. Aside from fees, investors should also consider the index and the indexing methodology, as well as the liquidity and track record, of the ETF.
BM: Lastly, ETFs are increasingly being used in constructing MPF funds. In your opinion, how will this trend unfold?
RC: We believe that the increasing inclusion of ETFs, such as the Tracker Fund of Hong Kong, in MPF portfolios is a positive development. This inclusion has allowed Hong Kong investors to benefit from low-cost investing with potential long term benefits for their portfolios. When it comes to retirement, every basis point of return counts, so we expect ETF adoption in the MPF space will continue to grow. Furthermore, we have been working with and will continue to partner with MPF providers to understand and address the long-term needs of their members. BM

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推動ETF領域創新

ray-chan

香港 SPDR ETF
業務拓展主管陳俊文
道富環球投資管理

1993年推出首隻在美國上市的ETF, 至今年在BENCHMARK交易所買賣基金公司大獎(實物ETF類別)中榮獲「同級最佳」大獎的道富環球投資管理,為投資組合建構提供了基礎。25年來,ETF蛻變成許多不同形式,但其核心目標始終不變:為投資者提供簡單、透明和具成本效益的投資方式。在25週年這個重要時刻,道富環球投資管理香港SPDR ETF業務拓展主管陳俊文為大家回顧ETF的過去,展望將來,並與投資者分享投資建議。

《指標》:恭喜!你們獲獎實在實至名歸!在ETF推出25 週年之際,你認為這產品如何為投資領域帶來創新?
陳俊文:多謝,在ETF 25週年獲得這獎項對我們特別有意義,我們深感高興!自我們推出首隻美國上市的ETF以來,截至2017年11月30日,ETF行業在全球規模已擴大至6,700隻,資產總值達4.7萬億美元。回顧ETF的演變,我們相信很多創新均由投資者所帶動的。例如,由於ETF與個別債券相比,前者具有流動性優勢,保險公司樂於運用ETF投資;財務顧問使用ETF進行多元化資產配置;還有一些財富管理公司將其投資理念透過ETF建構成為投資目標導向的產品。
此外,ETF甚至有助互惠基金創新。在ETF推出以前,1億美元的資金流入意味著互惠基金的投資經理別無選擇,只能將其留在現金或轉入貨幣市場基金。現在,同一筆資金可以投入一隻ETF中,投資於類似的項目,與基金的目標保持一致。
《指標》:ETF的發展走了一段很長的路,你對這市場未來的發展有何看法?
陳俊文:我們預計,未來隨著投資者需求不斷演變,ETF將有更多創新應用。例如,不少ETF現已允許投資者鎖定特定的投資機會,或更深入各個資產類別之中。2016年,我們成功在美國推出了一隻ETF,尋求在各行各業中投資於董事局和領導層實行高度性別多元化的美國公司,該ETF不僅讓投資者捕捉性別多元化公司的潛在回報,還可以利用資金鼓勵社會變革。
地區方面,我們認為亞洲的增長空間很大,因其市場滲透率較美國仍相對低。例如在中國這樣的市場,中產階級的數目甚至超過美國的總人口,現時ETF在進一步滲透這些市場方面仍有很大空間。ETF互聯互通等新措施將鼓勵更多人投資於ETF,而智能顧問(Robo Advisors) 可以成為拓展ETF分銷的潛在合作夥伴。基於ETF的多種好處,我們相信亞洲仍有很大的應用和創新空間。
《指標》:雖然ETF在亞洲市場不斷增長,但對於許多散戶投資者來說,ETF還是比較新的投資工具。如果他們想在投資組合中加入ETF配置,你有什麼建議?他們應該留意什麼因素?
陳俊文:ETF是高度靈活的投資工具,它可以在投資組合中扮演多種角色。例如ETF可用於構建低成本多元化核心投資,與個股、主動型基金或其他投資互相補足。我們稱這為「核心/衛星策略」。投資者也可使用ETF進行短期策略資產配置,投資於他們認為能提高投資組合回報的行業或資產類別。
不過,像其他任何投資一樣,投資者應先深入了解產品。皆因並非所有ETF都是一樣的,除費用外,投資者還應考慮ETF追蹤的指數和追蹤方法,及其流動性和往績。
《指標》:最後,在愈來愈多強積金基金當中看見ETF的身影,在你看來,這趨勢將如何發展下去?
陳俊文:我們相信愈來愈多強積金基金納入如盈富基金等ETF產品,對行業發展來說相當正面。這使得香港投資者能受惠於低成本的投資,長期而言這可為投資組合帶來潛在好處。有關退休的每一分回報均很重要,所以我們預期在強積金中使用ETF的趨勢將會持續增長。我們將繼續與強積金供應商合作,了解並配合其計劃成員的長期投資需要。 BM

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