SFST's speech at TraHK New Manager Inauguration Ceremony (English only)
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Diana (Executive Director and Chief Executive of Hang Seng Bank, Ms Diana Cesar), George (Chairman of the Supervisory Committee of Tracker Fund, Mr George Hongchoy), Rosita (Director and Chief Executive Officer of Hang Seng Investment Management Limited (HSVM), Ms Rosita Lee), ladies and gentlemen,
Good evening. It gives me great pleasure to join you here today at the inauguration ceremony for the new manager of Tracker Fund. Tracker Fund is the largest ETF in our market providing investors with a cost-efficient way to invest in our equity benchmark, the Hang Seng Index.
The significance and contributions of Tracker Fund to our market go far beyond its market size and liquidity, and the fund entails special historical meanings to the Hong Kong financial industry and our society at large. The fund was created against the backdrop of the Hong Kong Government's market operation in 1998, when a substantial portfolio of Hong Kong shares were acquired as a decisive action to maintain the stability and integrity of our market during the Asian Financial Crisis. After the market operation, the creation of the Tracker Fund was proposed as a solution for the Hong Kong Government to dispose of our portfolio in an orderly manner. Creating an ETF as a disposal vehicle was a creative solution with many merits, as it was stock neutral and would bring minimal disruption to our market. It also has a market development angle as it was the pioneer ETF for Hong Kong, and it paved the way for our ETF sector to thrive and prosper today.
The launch of Tracker Fund was proven to be a great success. With an issuance size of HK$33.3 billion, the fund's IPO was the largest IPO ever in Asia ex-Japan at the time of launch. Through the IPO of Tracker Fund and its Tap Facility, approximately HK$140 billion in Hang Seng Index constituent stocks have been returned to the market in an orderly and non-disruptive manner. With the great success achieved, the launch of Tracker Fund has marked a significant page of history for Hong Kong's financial market development. And with its proven track record of operational excellence going through subsequent market cycles, nowadays the Tracker Fund has become a trusted vehicle for many investors, both large and small, to gain exposures in our benchmark index. Also worth mentioning here is that a number of Mandatory Provident Funds (MPF) provide investors with exposures in Hang Seng index stocks via the Tracker Fund, so the fund also bears the important responsibility of accumulating and growing the wealth for our population to meet retirement needs.
Having covered briefly the history of Tracker Fund, I think it is time for us to look into the future. I am pleased to see that, after a thorough manager review completed by the Supervisory Committee of the fund, Hang Seng Investment Management Limited was chosen to be the new manager taking into account the best interests of the fund's unitholders. Given Tracker Fund's importance to our market, the responsibilities of managing it are not to be taken lightly, but with HSVM's comprehensive experience in investment management, I trust that the fiduciary duties to unitholders will be professionally and duly executed. Also, under HSVM's management, I look forward to Tracker Fund's continuous contributions to our financial market as one of the most trusted ETFs in Hong Kong for our investors.
I am also very pleased to see that two important changes will be introduced as HSVM takes on the role as new manager. Firstly, a new management fee schedule will be applied which aims to lower the effective management fee of the fund by approximately 31 per cent to 0.022 per cent per annum in the first three years, followed by a further reduction to 0.019 per cent per annum from the fourth year onwards. Based on assumptions in recent level of asset under management (AUM), the new fee schedule would represent around 40 per cent of reduction compared with the current charges. This significant fee reduction is in line with the global trend of lowering cost for ETFs, and will further enhance the competitiveness of Tracker Fund and benefit all of its investors.
The second important change is the introduction of a new RMB trading counter for the Tracker Fund, offering investors with a new option to gain exposures in Hang Seng Index stocks via the fund in RMB. This is also in line with the Government's strategy and objective to actively promote RMB internationalisation, and to enrich the availability of offshore RMB products for investors. This new RMB trading counter for Tracker Fund also complements our goal of allowing stocks traded via the Southbound Stock Connect to be denominated in RMB. In the future, we could expect more RMB products to be launched in our market, and they could better serve the investment needs coming from both the offshore and onshore RMB liquidity pools.
The launch of Tracker fund marks the beginning of our ETF market in 1999. Nowadays the ecosystem of our exchange traded products has grown substantially, having over 160 products and an aggregate market capitalisation of over HK$420 billion. The comprehensive ecosystem offers a wide range of exposures to investors across different asset classes and geographies, and our leveraged and inverse (L&I) products offer flexibility to those who seek to lever up or inverse their trades against the benchmark. And of course the latest catalyst of growth for our market is the launch of ETF Connect, in which the Tracker Fund is also one of the eligible ETFs for Southbound trading. The initial performance of the ETF Connect is very encouraging, as we saw that the average daily turnover for Southbound in August was HK$355 million, a 64 per cent increase compared with July when the ETF Connect was first launched.
Ladies and gentlemen, I am sure with our collective efforts, our ETF market will continue to grow as we keep on innovating and promoting further connectivity with the Mainland and international markets. To conclude, I wish to thank Diana and the Hang Seng team for inviting me to join the ceremony today, and more importantly, to take on the important responsibilities of managing the Tracker Fund. Twenty-four years ago when the Government conducted the market operation in 1998 it was the Year of the Tiger, and the Tracker Fund was born against that backdrop. Now we have completed a whole cycle and this year is also the Year of the Tiger, and we are together witnessing the beginning of a new chapter for Tracker Fund. I surely wish the fund will be as agile and as energetic as a tiger under the new manager. I wish you all an enjoyable ceremony today. Thank you.
Ends/Monday, September 19, 2022
Issued at HKT 18:49
Issued at HKT 18:49
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