BBH selected as custodian for first Hong Kong active ETF

BBH's asset servicing platform will help facilitate a same-day settlement cycle for all primary market creations and redemptions for the ETF .

By Joe Parsons

Brown Brothers Harriman (BBH) has been selected as the custodian and fund administrator for the first actively managed exchange traded fund (ETF) domiciled in Hong Kong.

The ICBC CICC USD Money Market ETF is being launched by China International Capital Corporation (CICC) with ICBC Asset Management acting as the investment advisor. BBH will also serve as trustee and registrar for the fund.

The ETF is the third money market ETF listed on the Hong Kong Exchange (HKEX) and the only ETF to offer a same-day settlement cycle for all primary market creations and redemptions. BBH’s proprietary technology model will enable the T+0 model.

“BBH’s customised service model and ability to support product features that have never existed in this market before is invaluable. When innovating in this way, it is critical to work with a recognised ETF servicing expert, one with global experience in actively managed ETFs, and we are pleased to further expand our partnership with BBH,” said Ning Lin, managing director of CICC Hong Kong Asset Management.

At the beginning of the year, the Hong Kong stock exchange began accepting applications for the listing of active ETFs.

“Investors in Hong Kong historically have been focused on actively managed investments,” said Chris Piggot, head of Hong Kong ETF servicing, BBH.

“The ability to combine the structural benefits of the ETF wrapper with an active investment strategy is an interesting opportunity for investors, especially in light of the fact that our recent ETF investor survey found that nearly 50% of institutional investors in Hong Kong expected to increase their exposure to actively managed ETFs this year.”

According to independent research firm ETFGI, ETFs account for around $5 trillion in assets globally, out of which a record $109.4 billion was invested in actively managed ETFs as of the end of November 2018, with 773 actively managed ETF listings from 127 providers in 20 exchanges around the world.

With the updated code on unit trusts and mutual funds issued by the Securities and Futures Commission earlier this year, Hong Kong became the second market in Asia where ETF issuers can launch actively managed ETFs.

The appointment is the latest effort by BBH to establish itself as the ETF custodian of choice in Hong Kong, which it sees as the next key fund hub.