Daily ETF Watch: 3 China Funds Launch

October 20, 2015

Two different firms rolled out a total of three funds today, two of them hedged, targeting the China market. Hong Kong-based CSOP Asset Management launched two ETFs—the CSOP MSCI China A International Hedged ETF (CNHX) and the CSOP China CSI 300 A-H Dynamic ETF (HAHA)—while Deutsche Bank also rolled out the Deutsche X-trackers CSI 300 China A-Shares Hedged Equity ETF (ASHX).

ASHX is basically a currency-hedged version of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR | D-53), a $541 million fund. The prospectus indicates that ASHR will be ASHX’s primary investment. ASHX comes with an expense ratio of 0.85 percent, five basis points more than the 0.80 percent charged by ASHR.

Along with CSOP’s CNHX, ASHX is one of the first two currency-hedged China ETFs. CNHX tracks the same index as another firm’s China fund, the KraneShares Bosera MSCI China A Share ETF (KBA | F-67). CNHX comes with an expense ratio 0f 0.79 percent, significantly less than the 1.31 percent charged by KBA.

Finally, HAHA tracks the CSI 300 index, which covers the 300 largest A-shares on the Shanghai and Shenzhen exchanges. However, it does so with a twist. According to the prospectus, many of the components in the index issue both A-shares and H-shares (listed on the Hong Kong Stock Exchange), and A-shares are known for trading at a premium to their corresponding H-shares.

This version of the CSI 300 will be able to include the A- or H-shares of a particular company; it will switch between the two depending on a proprietary formula that determines which one is the most undervalued (or least overvalued).

HAHA comes with an expense ratio of 0.75 percent.

Franklin Templeton To Launch Index ETFs

Yet another firm that has traditionally focused on active management strategies has filed for index-based ETFs. Franklin Templeton Investments has filed for the routine exemptive relief required to launch index-based ETFs, with the filing covering the usual assortment of domestic and international funds, fixed-income and stock funds, self-indexed funds, 130/30 funds and long/short funds.

This isn’t Franklin Templeton’s first foray into ETFs. In November 2013, it launched the actively managed Franklin Short Duration U.S. Government ETF (FTSD | C-42), which currently has about $190 million in assets under management.

This most recent move echoes similar paths taken by the likes of Goldman Sachs, J.P. Morgan and John Hancock. All of those firms are known for their actively managed portfolios, and all three have recently launched index-based ETFs. However, those firms have rolled out smart-beta ETFs, which many consider to be “quasi-active” strategies; it remains to be seen if Franklin Templeton will do the same.


Contact Heather Bell at [email protected].

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