JPMAM plans more active ETFs in China after debut fund hits US$300 million cap on day one

JPMorgan Asset Management anticipates expanding its presence with more actively managed exchange-traded funds (ETFs) in China following a successful debut fund that hit a fundraising target of US$300 million within the first day of sales, according to Desiree Wang, the firm's chief executive for China. Wang emphasized that this initial launch is merely a starting point for a larger initiative.

The fund, one of three in a batch of 18 active ETFs approved by the China Securities Regulatory Commission on October 19, attracted over 15 billion yuan in total subscriptions in October alone. Wang highlighted that the fund was the first among the 18 to reach the fundraising target, a result that surpassed expectations. Preparations for the fund's debut included over 750 roadshows and training sessions aimed at educating mainland investors.

This active ETF is unique among the 18, being the only one from a foreign-owned asset manager and the sole growth-style fund in the group. Managed by Li Bo, a seasoned manager known for delivering annualized returns above 10% over more than a decade, the fund's reputation likely contributed to its success. Active ETFs, which are relatively new to the Chinese market dominated by passive index-tracking funds, must disclose their holdings daily, a requirement that differs from traditional mutual funds.

While some analysts express concerns about the transparency exposing proprietary strategies to copying and front-running, Wang dismissed these concerns, arguing that transparency instead builds investor trust by showcasing fundamental research, institutional discipline, rigorous stock selection, and risk management.

JPMorgan Asset Management has become the world's largest active ETF manager, managing approximately US$257 billion in active ETF assets as of April. Wang attributed this success to the parent group's extensive experience. Expanding operations in China would require minimal capital expenditure, as essential infrastructure such as trading systems, technology, and distribution networks were established over the past three years.

The introduction of active ETFs in mainland China aligns with a broader trend of adopting actively managed exchange-traded funds across the Asia-Pacific region, according to Philippe El-Asmar, JPMorgan Asset Management's head of ETFs for the region. While the region has lagged behind the United States, which launched its first active ETF in 2008, El-Asmar noted that adoption is accelerating.

Australia pioneered the trend in 2019, followed by South Korea, Hong Kong, and more recently, mainland China. Taiwan serves as an example of rapid uptake, where actively managed ETFs already account for around 10% of total ETF assets under management. Following the Chinese securities regulator's support for active ETFs in mid-June, Bloomberg Intelligence estimates that these funds could attract at least US$50 billion into mainland stocks in their first year, assuming a 7% share of the ETF market, similar to Taiwan's experience.

Future expansion, dubbed "ETF 3.0," will focus on research-intensive, outcome-driven structures, including funds that utilize derivatives to generate income or protect against losses. El-Asmar emphasized that realizing this growth requires regulatory convergence across markets and ongoing investor education to bridge knowledge gaps among retail participants.