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Van Eck Associates, parent of exchange-traded fund provider Market Vectors ETFs, has appointed ChinaAMC as sub-advisor to the newly rebranded Market Vectors ChinaAMC A-Share ETF (PEK).
ChinaAMC is a wholly-owned subsidiary of China Asset Management Co., China’s largest management company in terms of mutual fund assets under management.
The Hong Kong-based firm’s status as a Renminbi Qualified Foreign Institutional Investor (RQFII) will allow the Market Vectors ETF, formerly called the Market Vectors China ETF (PEK), to have direct exposure to physical China A-shares, providing investors with enhanced access to the Chinese equity markets.
The fund currently provides exposure to China A-shares synthetically through the use of derivative instruments such as total return swaps.
“We are very excited not only to now offer direct exposure to physical A-shares through PEK, but also to be working with an RQFII sub-advisor of ChinaAMC’s caliber,” said Amrita Bagaria, ETF Product Manager with Market Vectors. “We believe their depth of knowledge of the Chinese marketplace will prove to be invaluable to the fund’s investors, and PEK’s ability to invest directly in the A-share marketplace makes it an even more compelling investment option for China-focused investors.”
Listed on the NYSE Arca, the fund has the longest active track record of any US-listed Chinese A-share equity-focused ETF, having launched on October 13, 2010, and was the first of its kind to offer broad exposure to China A-shares, which represent the largest portion of China’s equity market.
It is linked to the CSI 300 Index, a modified free-float market capitalization weighted index compiled and maintained by China Securities Index Co. The index consists of 300 A-share stocks listed on the Shenzen or Shanghai stock exchanges, representing equity securities of companies incorporated in mainland China. These shares are denominated in Chinese Renminbi (RMB).
Originally open only to domestic citizens of the People’s Republic of China, the A-share market was opened to foreign investors in 2002 via the Qualified Foreign Institutional Investor (QFII) quota program. In December 2011, the RQFII quota program was introduced by Chinese authorities and allows Hong Kong subsidiaries of fund management companies and securities houses from mainland China to launch RMB investment products in Hong Kong and to invest in securities listed in mainland China.
“A-shares represent the largest portion of the Chinese equity market as well as the largest segment by market capitalization of the primary emerging market countries,” continued Bagaria. “Through our RQFII sub-advisory relationship with ChinaAMC, we are very excited to enhance PEK’s ability to provide access to the full China growth story by directly investing in shares of local Chinese companies that may be poised to benefit from the country’s rapidly growing middle class.”
The fund currently has a net expense ratio of 0.72 percent.