Axioma and CSI to collaborate on smart beta China A-share indices

Mar 11th, 2013 | By | Category: ETF and Index News

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Risk management and portfolio optimisation specialists Axioma and index provider China Securities Index (CSI) are to collaborate on a new series of smart beta strategy indices on China’s A-share market. Chinese A-shares are shares in domestic companies incorporated in mainland China and traded in Renminbi on local stock exchanges.

Axioma and CSI to collaborate on smart beta China A-share indices

Axioma and CSI have agreed to collaborate on a new suite of smart beta strategy indices for China’s A-share market.

The indices, which will be distributed by CSI, will be based on the popular CSI 300 Index and will consist of a basket of securities, chosen from the underlying index and constructed with Axioma’s optimisation technology and factors derived from Axioma’s China Robust Risk Model.

The CSI 300 tracks the performance of the 300 most representative A-shares listed on the Shanghai and Shenzhen stock exchanges, as measured by a combination of market capitalisation and liquidity.

The new indices will reflect an underlying source of systematic return (known as smart beta) currently only available via active strategies. The indices will target both signal strength and investability via a two-step process aimed at capturing a strategy’s return, while ensuring that the resulting indices are replicable.

Olivier d’Assier, Asia Pacific Managing Director at Axioma, commented: “In the risk-on, risk-off environment of post-2008, these new indices will help investors by better capturing systematic sources of return in a risk controlled and efficient manner.”

He added: “Axioma is very proud to partner with CSI in the development of these innovative strategy indices, designed in response to growing investor demand for more sophisticated tools to assess, measure, and manage their risk.”

Zhong Liu, Deputy General Manager of CSI, said: “We are delighted to partner with Axioma, a leader in portfolio optimisation and multi-factor risk modelling, to develop innovative and practical strategy indices on China’s A-share market for both domestic and international asset managers.”

The indices are likely to have a range of uses, including as underlyings for index-tracking mutual funds and exchange-traded funds (ETFs). However, it could be sometime before these indices hit the market in ETF format. In the interim, investors have a couple of related options.

For conventional CSI 300 exposure, investors could consider the db X-trackers CSI 300 UCITS ETF (XCHA) from Deutsche Asset & Wealth Management (part of Deutsche Bank). This fund is listed on London Stock Exchange, Deutsche Börse and Borsa Italiana, and has some £626 million in assets under management.

Meanwhile, for smart beta exposure, investors could look to the PowerShares FTSE RAFI Hong Kong China ETF (PSRH) from Invesco PowerShares. The fund tracks the FTSE RAFI Hong Kong China Index, a fundamentally-weighted index reflecting a portfolio of Hong Kong-listed stocks (not A-shares) based on book value, income, sales and dividends. The fund is listed on the London Stock Exchange and Borsa Italiana.

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