Yuanta plans Taiwan’s first commodity ETFs

Yuanta Securities Investment Trust, Taiwan's biggest fund house by assets, plans to launch the country's first commodity-focused exchange-traded funds this year.

The aim is to list a gold ETF by September and a crude oil ETF in December, says Julian Liu, president and CEO of Yuanta. The two ETFs will track the S&P GSCI gold and crude oil indices, respectively, using use gold and oil futures to replicate the return.

This comes after markets regulator the Financial Supervisory Commission relaxed the rules in February, allowing asset managers to launch ETFs that invest in futures contracts.

Taiwanese fund houses previously found it hard to launch commodity ETFs because they and their market-markers could not hold physical commodities, Liu tells AsianInvestor. But now, as long as they hold a futures trust licence, asset managers can use futures to track indices.

Indeed, Yuanta already offers a fund that uses futures to replicate the spot return of commodities, and the correlation of futures to physical commodities is 98%.

Liu expects demand for commodity ETFs to come from both retail and institutional clients. “Taiwanese equities have been sinking for a while. Investors are looking for new types of investment products,” he notes. Taiwanese industrials and manufacturers will also use commodity ETFs as hedging tools, adds Liu.

Meanwhile, Yuanta will launch leveraged and inverse ETFs once the regulations allow them, he adds. And once renminbi qualified foreign institutional investor scheme is approved and quota is handed out to Taiwanese fund firms, Yuanta plans to launch both RQFII equity and fixed income ETFs.

Liu did not say when he thought these moves might happen.

Yuanta is the biggest mutual fund house in Taiwan with an AUM of NT$293.6 billion ($9.7 billion) as of February. It also has the biggest market share of ETFs listed on the local bourse.