"It keeps developing and winding up." Liu Fang (a pseudonym) of the market department of a leading fund company described the "ice and fire" in the ETF field.
Some ETF products will shrink in scale or even be liquidated soon after their issuance. In the survey conducted by the reporter of China Securities Journal, many public fundraisers sighed: the layout of popular industry theme ETFs cannot be left behind, and not issuing products means giving up this position, but whether it can be recognized by the market, maintain the product scale or even expand is still unknown.
At the same time, broad based index ETFs have been welcomed and become the main force of ETF scale growth this year. In particular, the Shanghai and Shenzhen 300ETFs have produced more than 100 billion level products, and the Shanghai Stock Exchange 50ETFs and other large market index ETFs are also popular.
Industry insiders believe that with the intensification of Matthew effect and the implementation of relevant new regulations, the settlement of ETFs that are "not long enough" in the future will be accelerated, and the continuous iteration of high-quality services and strategies will become a new choice for the development of ETFs.
ETF's trouble of "not growing long"
Even if the performance is commendable or covers the hottest track this year, many ETFs still frequently touch the "red line" of scale and face the embarrassing situation of being liquidated.
On April 30, Huatai Birui Fund announced that as of the end of April 29, the net asset value of Huatai Birui CSI non-ferrous metal mining theme ETF was less than 50 million yuan for 30 consecutive working days, which may trigger the termination of the fund contract. The announcement shows that, according to the provisions of the fund contract, if the number of fund share holders is less than 200 or the net asset value of the fund is less than 50 million yuan for 50 consecutive working days after the fund contract comes into effect, the fund assets will be liquidated and terminated according to the provisions of the fund contract, without the need to convene a general meeting of fund share holders.
Huatai Birui CSI non-ferrous metal mining theme ETF was established on November 30, 2023. As of May 13, its scale is only 18 million yuan. Since its establishment for more than half a year, the ETF has achieved remarkable performance. Benefiting from the rise of the resource sector, the ETF's yield since its establishment has been close to 20%, and the yield since 2024 has also exceeded 15%.
Coincidentally, on May 7, China Southern Fund announced that as of May 6, the net asset value of the fund of China Southern Securities Communication Service ETF had been less than 50 million yuan for 40 consecutive working days, which may trigger the termination of the fund contract. The fund was established on July 28, 2023, less than a year ago. Since this year, the fund has also achieved positive returns. As of May 13, the return rate of the fund this year has reached 7.59%, but the scale is only 42 million yuan.
The reporter of China Securities Journal found that since May alone, there have been ICBC China Securities Consumer Leader ETF, China Thailand Securities Information Technology Innovation Theme ETF, E Fund Hang Seng Hong Kong Stock Connect New Economy ETF, E Fund China Securities All means Building Materials ETF, Tianhong China Securities Shanghai Hong Kong Shenzhen Internet of Things Theme ETF, GF China Securities Information Technology Innovation Theme ETF Yinhua CSI R&D Innovation 100ETF and others have announced that the fund size has been less than 50 million yuan for several consecutive days, which may trigger the liquidation. It is not difficult to find that these "small" ETFs are industrial track products. Among them, there are some products just established at the end of 2023 or the beginning of 2024.
In addition, of the 73 funds liquidated this year, 8 are ETFs or ETF feeder funds. Except for BOC Securities GEM ETF Link A, the rest are industrial track products. Since January 1, 2023, 42 of the 333 liquidating funds are ETFs or ETF feeder funds. Except for a few broad based index ETFs, the rest are industrial track products.
The scale of broad-based index ETF increased significantly
On side A, ETFs in some "small" industrial tracks have been reduced to mini products, while on side B, the scale of ETFs in the broad based index has increased dramatically.
Since this year, ETF has continued the momentum of rapid development and its overall scale has continued to grow. Wind data shows that as of May 13, the total size of 765 stock ETFs this year has reached 1497.087 billion, with an overall growth of 124.099 billion.
Broad based index ETFs have become the winners of the scale growth of stock ETFs. Since this year, there have been 298 stock ETFs with increased share, including 22 stock ETFs with a scale growth of more than 2 billion. Except for E Fund, CSI artificial intelligence ETFs and other individual industry track products, most of them are broad based index ETFs.
Among the stock ETFs whose scale has increased by more than 10 billion since this year, there are four Hushen 300ETFs, namely, E Fund Hushen 300ETF, Huatai Birui Hushen 300ETF, Huaxia Hushen 300ETF and Harvest Hushen 300ETF. The scale has increased by 49.225 billion, 19.091 billion, 15.899 billion and 15.763 billion respectively since this year. The scale of Huatai Berry Hushen 300ETF, E Fund Hushen 300ETF and Harvest Hushen 300ETF has successively exceeded 100 billion yuan, among which Huatai Berry Hushen 300ETF once stood at 200 billion yuan, becoming the largest non-commercial ETF in China. The total scale of the above four Shanghai Shenzhen 300ETFs has increased by 99978 million since this year. In addition, the scale of Huaxia SSE 50ETF has increased by 10.738 billion since this year, and the scale has also exceeded 100 billion yuan.
In addition, the scale of many broad based index ETFs, such as E Fund GEM ETF, China Southern Securities 1000ETF, GF Shanghai Securities Technology Innovation Board 50ETF, E Fund China Securities A50ETF, has increased by more than 2 billion since this year.
It is worth mentioning that large funds have become "big buyers" of broad-based index ETFs. According to the 2023 annual report of Huatai Berry Hushen 300ETF, as of the end of 2023, Central Huijin held 6.247 billion shares of Huatai Berry Hushen 300ETF, ranking the first largest holder. The ETF's first quarterly report in 2024 showed that the shares held by "Institution 1" at the beginning of the period were the same as those held by Central Huijin at the end of last year. According to the first quarterly report of 2024 of China Southern Securities 500ETF, the suspected "Institution 1" of Central Huijin applied for about 2.465 billion ETFs, costing about 13 billion yuan. The 2024 quarterly reports of Huaxia Hushen 300ETF, E Fund Hushen 300ETF, Harvest Hushen 300ETF, and Huaxia Shanghai Stock Exchange 50ETF also show the signs of massive buying by Central Huijin.
In addition, the reporter of China Securities News also noted that fund companies are continuing to deploy broad based index ETFs. Recently, Guangfa SSE 50ETF, Fuguo CSI 300ETF and Hua'an Shenzhen Main Board 50ETF have been "ready for distribution" or are being issued.
New choice of crossroads
"Many of these 'mini' products are hot industry theme ETFs issued by fund companies in the extreme structured market," said an index fund manager. "In fact, the capacity of many racing tracks is not large, and most of the products are homogeneous. If it is not for the head products, it is difficult to form a competitive advantage."
In early April, new regulatory requirements were introduced for mini products. In terms of supervision, fund companies are encouraged to bear all kinds of fixed costs of mini products on their own and will no longer be disbursed from fund assets. If the fund company chooses not to bear the fixed cost of the mini product, it needs to provide a solution and change the mini status or liquidation of the product before the end of 2024. At the same time, it is strictly prohibited to use "help funds" and other forms to avoid paying fixed fees for mini products and other violations.
The new requirements for mini products have come out "full moon". "Before that, the fund companies would try their best to 'protect' the ETF of some segments of the track, because it may not be the wind tunnel of this track now, and keep the 'shell'. When the wind tunnel of the industry comes, this ETF may still 'take off'." A senior insider told the China Securities Journal reporter, In the future, whether it is the inherent capital of the fund company or the external "help capital", the cost will be high. Once the "help capital" is withdrawn, the fund will become a mini product again. Under the background of cost reduction and efficiency increase of fund companies, the fund companies will probably choose to liquidate ETFs whose scale continues to fall into a mini situation.
"Under the new commission rules, it was also difficult for fund companies and securities companies to exchange trading commissions for scale on ETFs before, so in the future, ETFs of this sub track will inevitably face the situation of rapid clearing." A securities business insider said.
Although the clearing of mini ETFs is conducive to optimizing resource allocation and improving operating efficiency of fund companies, the liquidation process will inevitably bring pain to ETF holders. A person from a large fund company said that when it was in a "mini" state, due to its small size, many ETFs would become arbitrage tools, and frequent large inflows and outflows of funds would increase the "friction" cost, which would bring considerable management difficulties to the fund and affect the interests of the holders. In addition, in the process of liquidation, investors may have to bear redemption costs and other related costs, which will have a greater negative impact on their interests. After liquidation, investors' floating losses on the product will become actual losses.
The reporter of China Securities Journal learned that with the acceleration of the process of survival of the fittest, the future ETF "big factories" will pay more attention to the competition of ETF services and strategies. "With the vigorous development of the ETF market, strategic research and development and iteration have become the core of competition. In the past, investors often decided their own investment strategies when buying ETF products. In the future, fund companies need to provide more complete investment and services around the strategic system to meet the needs of different investors. For example, targeted suggestions are provided for partners, securities investment advisers and institutional customers through strategic frameworks such as large and small disk rotation. In this process, the R&D and iteration of strategies will become the key for the ETF industry to gain competitive advantage in the "involution". " Wang Lele, ETF investment director of Wells Fargo Fund's quantitative investment department, said.
