State Street Dropped as Manager of Hong Kong’s Biggest ETF
Hong Kong’s Biggest ETF Gets New Manager as State Street Removed
(Bloomberg) -- Hong Kong appointed a Hang Seng Bank Ltd. unit to manage the city’s largest exchange traded fund, replacing State Street Corp. after the U.S. firm became embroiled in a controversy over sanctioned Chinese companies last year.
The Tracker Fund is the most actively traded ETF in Hong Kong with HK$112.8 billion ($14.4 billion) in assets, tracking the benchmark Hang Seng Index. State Street Global Advisers, the incumbent manager and unit of State Street Corp., last year said it would avoid making new investments in sanctioned companies such as China Mobile Ltd. that are included in the index, but quickly reversed its decision after a local outcry.
The shift to Hang Seng Investment Management Ltd. is expected to be completed in the third quarter, subject to regulatory approvals, the fund said in an exchange filing Tuesday.
Boston-based State Street said it was “grateful” for its partnership with the Hong Kong Monetary Authority and the Tracker Fund.
“We are confident that our experience, scale and global footprint will enable us to serve investors” across Asia into the future, the firm said in a statement.
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Hang Seng will receive a maximum annual management fee 0.045% in the first three years, dropping to an effective rate of 0.019% from the fourth year onwards. That’s lower than State Street’s fee of as much as 0.05%, according to the filing. The effective trustee fee will be lowered to the same level as the management fee. State Street remains the Tracker Fund trustee.
“It is a privilege for Hang Seng Investment Management Ltd. to be given the responsibility of managing TraHK, which holds a deep meaning for Hong Kong,” said Diana Cesar, chief executive officer of Hang Seng Bank, the parent company controlled by HSBC Holdings Plc.
The Tracker Fund, along with the broader market, has seen high volatility recently. Outflows from the fund hit a record on March 18, following record inflows a day earlier, Bloomberg data show.
The Hong Kong government set up the Tracker Fund of Hong Kong in 1999 to dispose of shares acquired when it fought against speculators during the Asian financial crisis.
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