SFC facilitates broadening of master-feeder ETFs offerings in Hong Kong

The Securities and Futures Commission (SFC) has released a revised circular that allows SFC-authorised feeder Exchange-Traded Funds (ETFs) operating under a master-feeder structure to invest in overseas-listed master ETFs, including actively managed ETFs, from various markets. This move comes in response to the growing global ETF market, which reached a total of US$12.7 trillion in assets under management (AUM) by the end of the first quarter of 2024. Actively managed ETFs, in particular, have experienced significant growth over the past five years, outpacing the overall ETF market. In the Asia-Pacific region, actively managed ETFs saw a remarkable AUM growth of 82% in 2023, and their market share in Hong Kong surged from 1% in 2019 to 13% at the end of 2023. This trend has caught the attention of product issuers who expressed a strong interest in bringing well-established actively managed ETFs to Hong Kong through a master-feeder fund structure, taking advantage of the city’s thriving ETF market. The SFC recognizes the potential benefits of actively managed ETFs for investors and aims to facilitate the growth of the Hong Kong ETF market by extending streamlined requirements to include actively managed ETFs. This move is expected to save costs, provide flexibility to ETF issuers, expand investment options for investors, and maintain investor protection standards. Ms. Christina Choi, the SFC’s Executive Director of Investment Products, believes that streamlining the requirements for master-feeder ETFs will enhance Hong Kong’s competitiveness in attracting overseas ETFs and strengthen its position as a leading asset management hub. The SFC will continue to engage with the industry to explore initiatives that promote market development and benefit the Hong Kong market as a whole. Resources: https://apps.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=24PR88