The battlefield for publicly offered ETFs has expanded, capturing the attention of more broad-based indicesWith February 19 marking a significant day for the market, approval for the launch of the China Securities A50 ETF saw converging interest from ten prominent publicly traded fund companiesAll ten products hit the market with the lowest fee rates currently available, along with a staggering 20 billion yuan fundraising ceiling set for initial offeringsThis initiative showcases a strong pivot toward more diversified investment vehicles that appeal to a broader range of investors.

In the wake of the Chinese New Year, broad-based ETFs like the CSI 300, CSI 1000, and CSI 2000 began to exhibit a strong “capital attraction” effect

This surge has consequently heightened market attention on broad-based ETFsTraditionally dominated by a few major players in the public fund industry, a look at the companies launching the A50 ETF indicates a burgeoning interest from a wider array of fund management firms eager to stake their claim in this lucrative market.

Industry analysts have pointed out that given the current market landscape, long-term institutional investments are leaning more toward the strategic allocation opportunities that broad-based ETFs presentThe ongoing trend of reducing expense ratios is expected to characterize the future trajectory of ETFs as investors increasingly seek cost-efficient investment options.

The launch of the closely watched China Securities A50 ETF coincided with the first trading day post-holiday, an event that signified its importance in the investment landscape

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Ten publicly traded fund companies such as Huatai-PbR, EFund, Harvest, Fullgoal, Yinhua, Huabao, Morgan, Dacheng, ICBC Credit Suisse, and Ping An joined forces to offer this ETFThis convergence of major and mid-sized firms reflects a shift in the competitive dynamics of the ETF market and indicates that the demand for broad-based index products is drawing more players into the fray.

According to the offering prospectus, each of the ten A50 ETFs will adopt the industry’s lowest fee rates: a management fee of 0.15% and a custodian fee of 0.05%. This strategic move underscores the intense competition within the ETF sector, as firms look to entice investors by creating an ultra-competitive fee environment

Furthermore, the fundraising ceiling for each of these products is set at 20 billion yuan, so if all ten successfully reach their targets, this could infuse the market with a substantial influx of capital, estimated to be between 20 billion to 200 billion yuan.

Why have ten companies chosen to compete over a single product? The key lies within the China Securities A50 Index itselfLaunched on January 2 of this year, the index comprises the top 50 securities by market capitalization from leading publicly traded companies across various industriesIt aims to reflect the overall performance of representative firms across diverse sectors such as consumption, finance, industrials, utilities, materials, and healthcareNotably, the top ten stocks contribute nearly 50% to the index's weight, demonstrating the strength of these companies.

Renowned within the industry as the "Chinese Beautiful 50," the A50 index has demonstrated impressive growth, recording a cumulative increase of 35.7% since its inception on December 31, 2014. In stark contrast, the Shanghai Stock Exchange 50 Index and the CSI 300 Index recorded declines of -9.9% and -2.9%, respectively, during the same period.

Yang Delong, Chief Economist at Qianhai Kaiyuan Fund, expressed optimism regarding the A50 index’s profile, noting that it captures the 50 largest market-cap Chinese companies and has gained significant attention from investors

He projects a positive growth outlook for these firms, thereby enhancing the attractiveness of the index.

Wang Qionghui, Chief Executive Officer of Morgan Asset Management China, voiced excitement about participating as the sole foreign fund manager in this inaugural offeringShe remarked, “The China Securities A50 Index will assist investors in discovering growth points within the Chinese economy, serving as a crucial vehicle for both domestic and foreign capital seeking to allocate toward core A-share assets.”

The rush to release multiple A50 ETFs on the first trading day following the holiday offers indirect evidence of the current popularity of broad-based ETFs in the market

It comes on the heels of a robust buying spree preceding the New Year, during which various broad-based ETFs were heavily purchased by investors, with some, like the CSI 300 ETF, often ranking among the highest in turnover among all stock-type ETFs.

A professional from the public fund industry noted that prior to the holiday, the indexes were trading at relatively low levels, making them attractive from a long-term allocation perspectiveDriven by institutional investors, particularly those looking for stable, long-term returns, broad-based ETFs are often viewed as safer bets during more volatile market conditions, further boosting their appeal.

This professional emphasized that sector-focused ETFs tend to depend heavily on specific industry trends, which can be unpredictable

In contrast, broad-based ETFs have displayed an impressive ability to attract capital during tumultuous periods, making them a preferred choice for many investment firms currently prioritizing this segment.

Discussing the trend of fee reductions, professionals in the field have pointed out that this is part of a broader evolution within the public offering sector, with prior instances of management and custodial fees being loweredFollowing last year's reforms in public offering rates, companies have increasingly opted to lower fees to capture more inflows as investor sensitivity to costs grows.

Since the start of 2023, several ETFs and their corresponding fund links have announced fee reductions, signaling a shift towards more investor-friendly pricing structures

For instance, Invesco Great Wall recently reduced the management fee rate of its ChiNext 50 ETF from 0.5% to 0.15%, while the custodian fee was similarly lowered from 0.1% to 0.05%. In February, ICBC’s CSI 300 ETF cut its management fee from 0.45% to 0.15% as well, illustrating a race to lower costs.

A professional from a leading public fund expressed that the trend towards lower fees for index-based products is inevitable, indicating a lasting shift in the landscape.

In sum, the move towards lower fees aligns with a broader effort to reduce costs and increase accessibility for general investors