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Premia Partners launches two smart beta China A-shares ETFs


Hong Kong-based ETF specialists Premia Partners have launched two smart beta China equity ETFs designed to provide investors with diversified exposure to the China A-shares markets.

The ETFs track the CSI smart beta indices which employ methodology provided by Caixin Rayliant Smart Beta led by Dr Jason Hsu, Chairman and CIO of Rayliant Global Investors, and Co-founder and Vice Chairman of Research Affiliates.

The two HKEX listed ETFs utilise a fundamental, multi-factor approach, and each consists of approximately 300 Shanghai and Shenzhen listed stocks. Both ETFs are physical A-shares ETFs utilising Stock Connect and have a total expense ratio of 0.50 per cent compared to the 1 per cent average fee typically observed in the industry.

The Premia CSI Caixin China Bedrock Economy ETF tracks the CSI Caixin Bedrock Economy Index, which aims to capture leading companies that drive the mainstream economy of China, based on economic size, financial health and low risk characteristics; the Premia CSI Caixin China New Economy ETF tracks the CSI Caixin New Economic Engine Index, which aims to capture leaders from new economy industries, selected based on non-fixed asset size, financial health and growth characteristics.

Premia writes that with the inclusion of China A shares in the MSCI Emerging Market index, investors are increasingly looking for strategies that provide efficient access to the Mainland markets, while seeking to generate above-market returns relative to simply buying the largest companies by market capitalization or taking concentrated bet in the SOE or financial sectors.

The Premia ETFs leverage on Caixin Rayliant Smart Beta’s academic research, which identifies several equity factors — including value, quality, low volatility, size — as having the potential to outperform the broader A-shares equity market over the long term. The fundamental beta approach also introduces a buy-low, sell-high discipline into factor investing, as opposed to traditional market capitalization approaches that exhibit tendency to buy-high and sell-low.

“We are very excited to partner with CSI, Madam Hu Shuli and Dr Jason Hsu and their team at Caixin Rayliant in offering these two ETFs,” says Rebecca Chua, Managing Partner of Premia Partners. “Dr Hsu has long been the leading voice in the smart beta and factor investing world, with his work at Research Affiliates widely recognised and adopted by investors globally. We are honoured to be able to leverage on him and the Caixin Rayliant team’s insights and expertise in bringing to market the world’s first fundamental multi-factor China A-shares ETFs.  These strategies are based on robust academic research into China factor performance and are the first to capture the nuances of mainstream and new economy Mainland markets instead of following a narrow market capitalization approach.”

Hu Shuli, editor-in-chief of Caixin Media and founder of Caixin Insight Group says: “As the Chinese economy continues to expand, its financial markets become increasingly relevant for global investors. We are committed to provide the best financial content through our international platform, Caixin Global, and Caixin Rayliant which empowers investors with world class smart beta capabilities to participate in China’s growth.”

Dr Jason Hsu. Chairman and CIO of Rayliant Global Advisors and Vice Chairman of Research Affiliates says: “We are so pleased to be working with Premia Partners on the NEI and BEI ETFs. Premia shares our passion for bringing to market state of the art investment strategies at low cost that generate long term value for investors. Particularly in Asia, where there is a culture of high fees and short-term performance selling, such strategies are in great need and Premia is taking a lead to fill the gap. These two ETFs offer the opportunity of excess return through low cost exposure to systematic sources of returns.”

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