In 2022, when markets were down, tracking the index worked against investors, making it crucial for exchange-traded fund (ETF) providers to keep the tracking error of their products tight to minimize losses.
As ETFs do not outperform or underperform their benchmark, the best ETF providers last year were those that were able to keep the tracking errors of their ETFs low, essentially fulfilling their raison d'être.
To minimize tracking error, ETF providers will need to keep their expense ratio low and closely monitor the underlying assets of their ETFs to ensure they do not deviate from the benchmark.
A low expense ratio can indirectly contribute to minimizing tracking error, as demonstrated by the price war between BlackRock and Betashares in the Australian ETF market in February 2023.
BlackRock cut the fees on its flagship Australian ETF, the iShares ASX200 ETF, to 0.05%, down from 0.09%, and Betashares immediately reduced the fee on its Australia 200 ETF from 0.07% to 0.04%, highlighting the rival managers' efforts to lower their expense ratios.
However, the real work for ETF providers lies in closely monitoring their holdings in the underlying assets of their ETF portfolios to ensure they do not deviate from the benchmark.
This requires constant monitoring of the benchmark and buying or selling assets (stocks, bonds, etc.) to maintain the same level of holdings in the ETF as in the benchmark.
The Best ETF Provider Awards 2023 revealed that very few market players managed to do both of these tasks effectively. Therefore, the winners of this year's awards deserve recognition for their outstanding performance.
BEST ETF PROVIDERS
Yuanta Securities Investment Trust Company
Yuanta SITC retains the distinction as the best and dominant ETF provider in the region. By the end of September 2022, Yuanta SITC was managing 49 ETFs with combined assets under management (AUM) of NT$648 billion (US$20.7 billion), up 12% year-on-year, an increase for the second year in a row. Its ETFs has the best performance ratios, reflecting the company’s focus on maintaining the quality of existing products for the benefit of investors versus just issuing new products to build market share. Yuanta ETFs also lead the industry in adopting ESG in the investment and post-investment processes.
Betashares is the best homegrown ETF provider in Australia despite facing stiff competition from foreign players. In 2022 it had A$24.76 billion (US$16.72 billion) in AUM, up 4.9% from the previous year. This growth was due almost entirely to fund inflows, rather than asset appreciation.
China Asset Management Company
Based on the superior quality and performance of its ETFs, China Asset Management Company (China AMC) is the leading ETF provider in China. In 2022, the AUM of its equity ETFs accounted for 21.32% of the domestic equity ETF market, making it number one among domestic fund companies. The firm also is a leader in ETF ESG investing in China.
CSOP Asset Management
CSOP Asset Management posted a 10.7% growth in AUM in 2022 despite a slumping market. It had a 17% market share and accounted for 26% of Hong Kong’s newly-issued ETFs for the year. It is also a key player in the Connect scheme as well as a strong leader in ESG investing for ETFs.
Nikko Asset Management
Nikko Asset Management keeps its leading position in Japan’s ETF market, accounting for 19.68% share of all ETFs traded on the Tokyo Stock Exchange. Nikko AM’s strength lies in its global capabilities, including a global team in Edinburgh and a global fixed-income team in London covering Emerging Asia ex-Japan equity, as well as a fixed-income team in Singapore. It also covers Chinese equities and multi-assets.
AmInvest is the dominant and largest ETF provider in Malaysia with a market share of 77% of the ETF industry’s AUM of 2.1 billion ringgit (US$471 million). Its ETFs have been performing well, reporting a 4% growth over a three-year period, compared with the industry’s 1% drop during the same period. AmInvest has focused on maintaining the quality of its ETFs, thus benefiting investors even in a down market.
Nikko Asset Management
Nikko Asset Management overcame challenges to keep its position as among the leading ETF providers in Singapore in 2022. Its AUM level stayed stable, while most of its rivals experienced significant outflows. As of December 2022, its five-year compound annual growth rate (CAGR) stood at 23%, a testament to its ability to deliver consistent growth and returns. Its products remain popular among investors in Singapore.
Cathay Securities Investment Trust – Winner
In 2022, Cathay SITE’s ETFs led the industry in terms of the growth in the number of beneficiaries, indicating its focus on maintaining the quality and performance of its products as well as on innovation. Its AUM grew more than 33% despite the challenging market conditions.
CTBC Investments – Highly Commended
CTBC Investments saw its ETF AUM increase by 19.53% in 2022, while the number of its beneficiaries jumped 54.21%. It was also the most active ETF issuer in Taiwan last year, successfully launching three new products despite the overall downturn in the market.
BEST ETF MARKET MAKER
Jane Street’s global trading volumes reached record levels in 2022, amounting to double-digit trillion dollars, of which ETFs represented about 20%. The average daily trading volume for its ETFs also amounted to double-digit billion dollars globally.
Yuanta Securities – Winner
Among ETFs for which Yuanta Securities has signed liquidity provision agreements, the flagship products for each category ranked first in terms of market share based on trading value. Yuanta Securities is constantly providing high-quality quotations and assists in the promotion of newly listed ETFs, resulting in a 2% increase in market share.
SinoPac Securities – Highly Commended
As the leading market makers in Taiwan, Sinopac Securities provides liquidity to clients. It had NT$102.6 million in ETF holdings in 2022, up 16.42% from the previous year.
KIS Vietnam Securities Corporation
KIS Vietnam is the authorized participant and market maker for more than 80% of the local ETFs with a market share of 39%. It continues to be the leading market maker in the market, covering 90% of the top Vietnam ETFs.
BEST ETF PARTICIPATING DEALER
Yuanta Securities – Winner
Yuanta Securities’ market coverage as a participating dealer was 95.9%, actively cooperating with every local ETF issuer. It served as the participating dealer of all newly issued ETFs. Its total AUM increased 10.3% to NT$2.35 trillion.
Fubon Securities - Highly Commended
Fubon Securities continues to provide sufficient liquidity for ETF issuers in Taiwan. Its coverage reached 90% for more than half of the ETFs listed in 2022.
BEST ETF CUSTODIAN
In 2022 HSBC won ETF mandates numbering almost in the triple digits and recorded a double-digit growth in AUM in Asia-Pacific ex-Japan. Its one-stop-shop ETF service has given the bank a clear edge over other ETF custodians in the region.
DBS last year launched the first variable capital company (VCC) ETF for a leading ETF provider in Singapore. As this was a VCC ETF and had no trustee function, the ETF manager needed to take over operational responsibility of a trustee, involving multiple parties including the participating dealers, DBS provided creative solutioning to integrate the processes.
BEST INDEX PROVIDER FOR ETFs
FTSE Russell – Winner
Based on client feedback, FTSE Russell was the favourite index provider for Asian sustainability ETF providers last year. In May 2022, its indices were used by BlackRock iShares Japan to launch two sustainable investment-related ETFs. An FTSE Russell index was also used by CSOP Asset Management to launch it low-carbon ETF in September 2022.
S&P Dow Jones Indices – Highly Commended
In Asia Pacific, major ETF product issuers recognize the unique attributes of S&P DJI as attested by launching new ETFs based on its indices, providing investors with a fuller range of investment choices and access to different asset class exposures.
China Securities Index – Winner
China Securities Index is the dominant Chinese index provider for ETFs listed on the Shanghai exchange, and the biggest in China. In 2022, there were 622 ETFs tracking CSI-managed indices in the region, about 19% more than in the previous year. In mainland China, 562 of the 716 listed ETFs tracked CSI-managed indices, 95 more than in the previous year. In other Asia-Pacific and Middle East markets, there were 60 ETFs benchmarked to CSI-managed indices.
Shenzhen Securities Information – Highly Commended
Shenzhen Securities Information is the index provider for the Shenzhen Stock Exchange. By the end of 2022, SSI had licensed a total of 194 index products with an aggregate AUM of over 190 billion yuan (US$27.4 billion).
BEST INDEX PROVIDER FOR ETFs, THEMATICS
For thematic products in Asia, Qontigo brings innovation to passive funds, ETFs, and structured products. In 2022 Qontigo had several sustainable index launches in the Asia-Pacific covering ESG, technology, and low-carbon themes.
For the full list of awardees of the ETF Awards, please click here.
For the full list of awardees of the ETF Product Awards, please click here.
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