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Bottom Up Public Offering ETF "Customized" Interest Chain

2019/11/8 9:53:00 0

Public OfferingETFCustomizationInterest Chain

The regulatory authorities will take over the ETF share of the shareholders of the listed company in excess of their holdings, and ask that the scale of their replacement should not exceed the weight of the ETF constituent stocks in the index. After the guidance of this window, some shareholders of the listed companies such as NavInfo and New Zealand began to give up the subscription of the corresponding ETF share.

What regulators are trying to interrupt is the public offering institutions that have been considering the scale of management over the past 3 years to provide a customized chain of interests for shareholders of listed companies to reduce demand.

In twenty-first Century, the reporter of the economic report learned from many sources that since 2016, providing ETF products "customized services" to specific targets has gradually become a development mode for public offering institutions to develop ETF products. The main way is that public offering agencies actively carry out marketing with shareholders who have partial reduction or market value management requirements, and customize their products according to their needs, and facilitate the reduction of the latter through over subscription.

Along with the ETF customization, equity ETF products have also been developing rapidly. But recently, this mode has stepped on the brakes because of the window guidance of regulators.

According to the insiders in the interview, the public offering agencies provide some convenience for the shareholders of some listed companies to customize their ETF products, which is convenient for their reduction. On the one hand, they are against the essential attributes of the public offering products as investment tools. On the other hand, the tracking errors caused by over purchase also bring injustice to some small and medium-sized investors.

Historical retroactivity

The first representative product is ETF of huitianfu, a state-owned enterprise in Shanghai.

In the summer of 2016, huitianfu Shanghai state owned enterprise ETF was officially issued. As a narrow base ETF, the total size of ETF issued by Shanghai state owned enterprises reached 15 billion 220 million yuan, which was ranked third in all ETF at the time only after the two 300ETF of Huatai Barry and Jiashi, and was also the largest in narrow base ETF.

In twenty-first Century, the economic news reporter learned that it coincided with the key period of promoting the reform of state-owned enterprises. On the basis of this foundation, huitianfu made marketing communications with relevant departments of state owned assets in Shanghai, and finally determined the form of this product.

One of the main directions of the reform of state-owned enterprises is from "managing enterprises" to "managing capital". At that time, the reform of state owned assets in Shanghai was also vigorously promoted, and ETF obviously could bring about an integrated effect on state owned shareholdings to a certain extent. A person close to Shanghai's state-owned assets revealed that "the state-owned shareholding platform has become the focus of service."

"In fact, it is also in this way to deepen the mix up of state-owned assets, because state-owned enterprises can issue shares of ETF and raise funds to the public at the same time, which is equivalent to the part of the over subscription of state-owned enterprises through the operation of products, which is actually accepted by social capital." The above close to Shanghai state owned sources said, "ETF for state-owned assets, it can solve the problem of reduction, but also to achieve equity management."

At that time, the emergence of ETF and ETF customization mode in Shanghai was a product of financial products serving the reform of state-owned enterprises. Before that, there were sporadic public offering of ETF products to meet the needs of the relevant shareholders, but the scale was limited.

In fact, on the eve of the ETF listing of state owned enterprises in Shanghai, the state-owned enterprises of Shanghai state owned the main holders. The proportion of the total share of the total fund held by Guo Sheng group, Shen Neng group, Shanghai city investment group and Shanghai Huayi top four group reached 56.67%.

The scale effect and management fee income brought by the ETF customized thinking of Shanghai state-owned enterprises are all jealous of the fund industry.

At the same time, the ETF issued by Shanghai state owned enterprise was invested into the demonstration work of ETF project of central enterprises, and the central business unit was set up in March 2017 to discuss the possibility of cooperation with the central enterprises.

"With the experience of ETF of Shanghai state owned enterprises, several funds have been relayed, and finally the shareholders of the listed companies of central enterprises have become the holders of the ETF." A close to Cheng Tong holdings revealed that "in this way, the central enterprises have achieved the goal of stock adjustment and reduction, and the management scale of the fund company has also expanded."

After nearly 2 years of preparation, in June 2018, the central enterprises' Cheng Tong holdings led the launch of the central enterprises structure index officially released.

In August 27th, on the basis of this index, the Boshi fund absorbed a total of ETF of the central issue of the central government's listed company shareholders by changing the total size of the central issue of Shanghai, which amounted to 25 billion 222 million yuan. In a single move, it exceeded the ETF of the state-owned enterprises in the state of ETF and became the second largest issue in history.

At the same time, there are also Huaxia and Yinhua, the central enterprises reform issued by the two companies, the ETF scale of the central enterprises reached 13 billion 812 million yuan and 5 billion 489 million yuan respectively, and the ETF scale of the three public offering agencies amounted to 48 billion 338 million yuan, while Beijing Cheng Tong Jin control and PetroChina group also held the largest holders in such products.

"In order to meet the need to replace the benchmarking index, this index is also tailored. There are, of course, some cases where the central enterprises shareholders do have an oversubscribed situation, so the linked funds also have the effect of attracting social capital at the same time." Those close to Cheng Tong Holdings said, "of course, we can not exclude some central enterprises from this way to achieve the goal of disguised reduction."

As a matter of fact, the above three central enterprises ETF has been shrinking from 48 billion 338 million to 30 billion 387 million in the past 27 years since August 2018, after listing and scale redemption. The scale has evaporated to 17 billion 951 million over the past year, with a shrinkage of 37.14%.

"The shrinkage rate of these shares was also reduced by the state-owned shareholders who were buying at that time." An analyst with a public offering product in Shanghai said.

Barbarous growth

After playing the role of service in the process of local state-owned assets and central enterprises reform, ETF customization is further promoted by the public offering industry. Public offering agencies are also more willing to work with some institutions and private capital to reduce demand and customize their corresponding ETF products.

"A lot of public offerings have seen this business opportunity and can't do business in state-owned enterprises, so they are doing some financial institutions and private enterprises." A product of a public offering company in Beijing said frankly, "so this mode soon rolled out, and tailored ETF products for shareholders became the choice of more and more fund companies."

In twenty-first Century, according to the Wind statistics, the economic report reporters found that there were 49 new ETF listed in 2019, with a total scale of 119 billion 240 million yuan at the time of issuance, but 28 of the debt based ETF with customized characteristics accounted for more than half of the total, which mainly covered the themes of industries, regions and private enterprises.

For example, the ETF, a leading military leader issued by the Wells Fargo fund in May this year, is the central authority behind its services. Shortly after the announcement, 7 listed companies of the China Aviation Department announced that shareholders would like to share the ETF with their shares.

"This ETF is a custom made by the rich country fund and the China Aviation Department." A close to the rich country fund people also said, "some central enterprises have a large number of listed companies. When the index is customized, these companies can also be brought in, which can largely meet these shareholders' reduction and stock management needs."

After the issuance and listing of the rich countries' military industry, its scale also dropped sharply. The scale of its issuance reached 7 billion 202 million, but in less than half a year, its scale dropped to 5 billion 850 million, and it was reduced by more than 1 billion 352 million.

In fact, in such products, reduction is often accompanied by product distribution and operation. Reporter statistics found that only 50 of the ETF listed this year, as many as 8 ETF, the latest size share decreased compared with the issuance, the total reduction of 38 billion 216 million, compared with the scale growth of only China's 5G ETF, and growth is only 645 million.

The problem with the logic chain of customization and reduction is that the size of some ETF products has been the biggest since its establishment. The above products said, "this kind of customized ETF will basically shrink after its establishment."

In some ETF products, a large proportion of shareholders have been overbought. For example, in September 19th, in the Ping An fund's Ping An certificate, Guangdong, Hongkong and Macau, the development theme ETF (hereinafter referred to as the bay area ETF), everyone life (former Ampang life) held the 196 million shares of Vanke A for the purchase, at the prevailing market price, the amount of the exchange was 5 billion 253 million yuan, while the total issuance scale of the bay area ETF was only 6 billion 10 million yuan, which means that only the proportion of investment contributed by Vanke A was only 87.40% of the total product.

"Vanke A is definitely an important index of the index from the perspective of market value, but it is obviously far from the ratio of more than 80%, so it must be the oversubscription of everyone's life." A close to the insurance personage said, "but in the case of oversubscription, ETF managers need to follow and adjust the index, so it is also necessary to sell these excess stocks."

In the industry view, ETF with regional, industrial and private enterprises characteristics can basically be customized products at present.

"Because the development of the domestic disks market is not yet mature. If the ETF is not a customized product, large shareholders will not be able to get the shares to exchange, so it will be difficult to raise the success." The insurance companies close to the above said, "therefore, fund companies are actively marketing this solution to many large shareholders with reduced demand in order to manage the scale."

Dispute of violation

Today, the ETF horse racing enclosure, which is based on the demand for large shareholders of listed companies, will end with guidance from the regulatory window.

According to the regulatory window requirements, the major shareholder of ETF can not violate the new rules.

However, according to the twenty-first Century economic news reporter from a number of public offering department, as early as 2017, when the new regulation was just landed, the exchange was concerned about this phenomenon, and asked the public offering manager to hand over the ETF main holders to provide a letter of commitment to meet the new regulation requirements.

"At that time, it was necessary to submit a letter of commitment, not to violate the new regulation in this way, which is equivalent to that if the offending violates, the exchange can make relevant punishment based on this." The above product people frankly said, "but for large shareholders, there is still a smaller reduction path, so fund companies are also actively engaged in this business."

"However, according to the restriction of" weighting by weight ", excessive purchase will not be allowed, and this customization is of little significance. The person said frankly.

However, behind the ETF customization business, there are still many compliance disputes.

On the product level, a large proportion of overstock can easily lead to a larger tracking error of ETF products, which will undoubtedly impact the interests of small and medium-sized investors. The more critical contradiction is that there is a natural opposition between the natural motives and interests of ETF.

"If ETF goes through the custom mode, the manager will also be aware that these listed companies have certain demand for reduction, but outside investors may not be aware that the purpose of their purchase or to invest ETF from the two tier market is to earn higher returns." Those products said frankly. "Similarly, as a holder, the service providers have natural advantages, and these small and medium-sized investors have become the natural" pick up men "through the design of ETF. This is not only a challenge to business ethics, but also a possible transfer of interest.

It is worth mentioning that, before, there were also public institutions which were punished by the SFC for excessive purchase. In 2013, the southern fund received reports from many small and medium investors during its energy suspension during the Yongtai energy suspension period. It was finally supervised by the Securities Regulatory Commission for 3 months, and ordered 47 million 990 thousand of its own funds to compensate the holders.

"In fact, it was because investors protested, so the South was fined later. But in recent years, in the process of ETF customization, this kind of product that helps shareholders to reduce holdings is not a kind of interest transmission." Those products said frankly, "one size fits all prohibition of over purchase will impede the development of ETF to a certain extent. On the contrary, it is more effective to investigate and deal with alleged violations."

 

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