Yuanta to list Taiwan's first commodity ETF
Taiwan’s first commodity-focused exchange-traded fund will be launched in April, months later than fund house Yuanta intended after delays in obtaining regulatory approval.
The debut of the gold fund comes a year after the island’s financial regulator relaxed rules to let fund managers launch ETFs investing in future contracts.
But unlike the launch of leveraged and inverse ETFs late last year, the gold fund has been held up by red tape and a lengthy marketing campaign amid weak investment demand for the metal.
Yuanta Securities Investment Trust Company (SITC), Taiwan’s largest fund house and ETF manager, will start fundraising for the gold ETF next month to list it on the Taiwan Stock Exchange in early April. Yuanta also plans to list a crude oil ETF in the second half of this year.
The ETF will track the S&P GSCI Gold Index Excess Return index, using gold futures to track the price of the metal.
The Financial Supervisory Commission (FSC) relaxed fund rules in February last year allowing asset managers to launch ETFs that invest in futures contracts.
This was an attempt to allow managers to expand into alternative ETFs, beyond those focused on equities and bonds. One leveraged ETF and one inverse ETF were listed by both Yuanta and Fubon SITC last November, with the funds’ combined AUM reaching NT$16 billion ($505 million) as of last month.
However, the commodities ETF has taken longer than expected. Yuanta had said it planned to launch a gold fund in September 2014, and a crude oil ETF last December.
The reasons for the delay include a longer than expected FSC approval process and weak gold sentiment in the third quarter last year, said Julian Liu, chief executive of Yuanta SITC. He added the education and promotion process for the gold ETF had taken longer than for leveraged/inverse funds.
Unlike the two largest Hong Kong-listed gold ETFs - the SPDR Gold ETF and the Value Gold ETF, which are physical replications and track the spot price - the FSC has not yet approved the launch of replicated commodity ETFs.
The FSC’s reforms were intended to boost capital market activities after years of low secondary market turnover, margin trading and index volatility.
Apart from relaxing rules ion ETF products, the FSC also plans to allow 15 of its affiliated state institutions, including the Central Deposit Insurance Corporation, to invest in local ETFs.
In total, the FSC’s affiliated institutions manage NT$50 billion in AUM, which could provide a further boost to Taiwan ETFs.
“The openness of the regulator is very promising and encouraging for Taiwan’s ETF investments,” said Liu. In terms of investor profile, he said the market was split equally between retail and institutional players.
Taiwan is a latecomer to Asia-Pacific’s commodity ETF market. In total, there are 76 commodity ETFs (including leveraged/inverse funds) trading in the region, with 112 listings (because of often dual listings of the same fund). Those regional assets rose in value by 13.6% year-on-year to $3.3 billion as of last month, according to London-based ETF data provider ETFGI.
India has 14 commodity listings with $1.38 billion in AUM, making it the biggest market for commodity ETFs in Asia. Hong Kong has seven commodity listings with $141 million in AUM, making it the fifth-largest market in the region, after India, Japan, Australia and South Korea.
Yuanta managed a total of $9 billion in AUM as of the end of 2014, with about $4.1 billion from ETFs.