Junks in the South China Sea

etfexpress 14/05/21

etf express beverly chandler captioned.jpgThis week we have an interview with Tim Harvey and his new hire, China financial services expert Brendan Mueller, from NTree who report that the domestic ETF market in China is on the increase, post pandemic.

“There is a growing ETF business in China,” Mueller says. “Both institutional and retail investors in China use the ETF structure and, with China out of the epidemic for over a year, we are seeing more ETF roadshows, building the business out locally.” 

In the piece, Harvey points out that in terms of ETFs, in 2018, the world’s largest ETF issuance happened in China, with GBP5 billion of seed money from Chinese pension funds invested into an index based on state-owned enterprises in China. At the time, the Department of Equity Management said: “The Central SOE Structural Reform ETF has set up the bellwether of the central SOEs’ structural reform in the capital market and provided a convenient channel for the social capital’s investment in the central SOEs’ reform.” 

ETFs are universally acclaimed for being a ‘convenient channel’ and TrackInsight’s global ETF survey for 2021 finds that investors love their convenience, but, first and foremost, their low cost and liquidity. TrackInsight’s founding CEO, Jean-René Giraud says: “With the current tailwinds and seemingly unstoppable rise of ETFs, the industry is on track to near the USD10 trillion assets under management milestone this year.” 

And quite a few of those assets will be coming from crypto. We have an interview with Compass Financial Technologies, the index provider which already provides crypto index solutions on USD5 billion of crypto assets. Founding partner Guillaume Le Fur tells us that the firm has launched a range of 18 volatility target indices for cryptocurrencies, designed to limit the huge volatility the assets can undergo. “As with any volatility target index, the objective is not to outperform the underlying but to be exposed to the digital asset with a dynamic control of your risk,” Le Fur says. 

The US ETP industry is not yet allowed to launch a bitcoin ETP, a long-held dream for a number of firms. The trust has been the route of choice, with Grayscale topping USD35 billion, but even they are suffering from a brief over supply of products and running at a discount, explains Greg King, Osprey Funds’ CEO in our interview with him this week. 

Osprey Funds has spun out of ETF issuer REX Shares, and brings us a Polkadot trust. DOT, the native token of the Polkadot network, has a market capitalisation of over USD31 billion and is the eighth largest cryptocurrency. One of its founders is Dr Gavin Wood, who was a co-founder and CTO of Ethereum. King has high hopes for Polkadot, which joins Osprey’s bitcoin trust launch from last year. The bitcoin product will be converted to an ETP when the US regulators allow but King believes that there is only an 80 per cent chance that that will happen in 2022. 

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Beverly Chandler
Managing Editor, ETF Express

Companies in this issue 
Compass Financial Technologies 
Evolve Funds Group 
Franklin Templeton 
Osprey Funds 



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