China Post has acquired the exchange traded fund business of Royal Bank of Scotland, giving the state-owned postal company its first foothold in the European market.
RBS sold its Market Access ETF range, which has assets of 360m euros, to China Post after discussions were held with a number of interested parties including asset managers, ETF providers and private equity managers.
The terms of the deal were not disclosed but the purchase was carried out by China Post Global, the group’s international fund arm, which was set up in Hong Kong last year. The RBS deal marks its first foray into Europe.
Including its postal services, China Post has assets of
USD1.05tn. Its subsidiaries include insurance, banking and asset management operations.
Deborah Fuhr, co-founder of ETFGI, a London-based consultancy, said: “Chinese financial services providers are stepping up their efforts to establish ETF operations, but this is the first time that we have seen an overseas acquisition of this kind.”
China Post Global plans to cross-list Market Access’s existing range of 10 ETFs in Hong Kong and will also develop new Chinese equity and fixed income ETFs that will be available in both Europe and Asia. It additionally intends to build China’s first smart-beta ETFs, which are a halfway house between passive and active management.
“We are aiming to be innovative,” said Danny Dolan, a managing director at China Post Global. Mr Dolan said the 10 newly acquired ETFs would be seeded with additional capital to make them more attractive to institutional investors. He added that two new sales staff have been appointed.
The annual management fees on the 10 ETFs will remain unchanged at between 50 and 70 basis points. However, improved terms for the underlying derivative contracts will reduce the overall cost on each fund by up to 40 basis points per annum.
The mainland Chinese ETF market remains at an early stage of development, with total assets of $28.9bn. Investors withdrew a net $5.7bn in 2015 from ETFs listed in mainland China after high levels of volatility led to the suspension of more than half the stocks listed on the Shanghai bourse.
Bank of China, China Life AMP and Huarun Yuanda all launched their first ETFs in 2015, bringing the number of mainland Chinese ETF providers up to 30, according to ETFGI. MDT/FT Exclusive
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