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Stoxx, Yuanta launch US$100 million smart beta fund in Taiwan
First smart beta fund launched by Yuanta
Bayani S Cruz 16 Nov 2017

STOXX Ltd and Yuanta Securities have collaborated to offer a smart beta fund, using a strategy based on the index provider’s Japanese experience that has recently raised US$100 million from Taiwanese investors. This is the first smart beta fund launched by Yuanta, which is best known for its exchange-traded funds (ETFs).

Launched on November 1, the fund targets retail investors and insurance companies who need stable yield annually, according to Annette Tseng, fund manager, index and quantitative investment business department, Yuanta Securities Investment Trust Co., Ltd.

“Since the population of Taiwan is aging and we’ve noticed the unemployment rate of people who are older than 60 is rising, we hope to deliver a stable dividend yield of around 3%-4% to solve their retirement financial problems,” Tseng says.

“We took inspiration from what we have done in Japan and imported that into the Asia-Pacific. Initially, we launched a family of indexes in conjunction with Mitsubishi (Mitsubishi UFJ Trust and Banking Corp or MUTB). Recently, Yuanta launched a passive fund for their local market based on one of these indexes. The fund went through an IPO phase of two weeks and raised assets in excess of US$100 million,” Matteo Andreetto, chief executive of Stoxx Ltd, says in an interview with The Asset.

The fact that Yuanta was able to raise US$100 million in just two weeks is an indication of the strong interest for smart beta strategies among Taiwanese investors in particular, and Asian investors in general, says Andreetto.

“If you go to market with the right product, by understanding exactly what the market wants you meet investors’ interests and needs. It’s all about creating that connectivity. Something that differentiates Stoxx as we are not forcing end investors into some standards but really try to understand what investors want, and based on market feedback going back to the drawing board and creating the strategy,” Andreetto says.

Smart beta strategies are gaining the interest of Asian investors because they are able to capture returns at a lower cost in the current low yield environment. Stoxx offers smart beta solutions to their Asian clients by leveraging on their experience in the Japanese market.

In July 2016, Yuanta and MUTB entered into a memorandum of understanding with Stoxx to expand the smart-beta footprint in Taiwan. Following this, Stoxx and MUTB co-developed the iSTOXX MUTB Asia/Pacific Quality Dividend 100 index, which was specifically designed for the Taiwanese market. The same index was used for the smart beta fund that was recently launched by Yuanta.

“We adjusted the index to APAC equities, we calibrated it in order to make sure that the characteristics will reflect in the APAC product, then we licensed that to Yuanta in Taiwan,” Andreetto says.

The strategy is based on stocks included in the Stoxx Asia-Pacific 600. Components are selected based on price stability, historical return, financial health, business stability and dividend quality criteria.

“The idea is to reduce the volatility and to increase the earnings stability of the overall basket of stocks we select. The result is a basket of the top 100 companies that reflect all those different metrics in a combined fashion and the portfolio tends to outperform the benchmark,” Andreetto says.

Stoxx takes a modular approach in developing indexes in order to ensure that it comes up with products which are suitable for the requirements of its clients.

Stoxx and MUTB began their collaboration in 2015 specifically to develop smart beta products for Japan and Asia-Pacific.

“Our cooperation is mutually beneficial as we can bring in our infrastructure and set up to provide the right investment solutions for the domestic clients, whereas our partner Mitsubishi understands the clients and the domestic and regional markets. By combining our strengths we can create the most suitable solutions. So Stoxx basically became the smart beta provider for Mitsubishi globally as well as for the Japanese market,” Andreetto says.

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