The asset management giant said the underlying rationale for the fund no longer existed.

BlackRock, the world’s largest listed asset management house, is delisting one of its China A-share-focused exchange traded funds from the Hong Kong Exchange because the firm thinks the underlying index no longer has a reason to exist.

The move by the US firm, which oversees a total of $5.7 trillion in AuM, follows similar steps by fund managers in 2017 to de-list China A-share ETFs, such as cases involving Casa Universal Asset Management and Deutsche Asset management (source: Fund Selector Asia). Reports said most ETFs that were retired hadn’t drawn in sufficient investor interest.

“The rationale for the fund closure is that the premise of the underlying index, to provide modular exposure for the inclusion of China A-shares in global indices, no longer exists. Following market and shareholder feedback, stock connect is now the privileged route by MSCI to achieve inclusion of A-shares into their broad indices, utilising a different universe of underlying constituents and a different index calculation methodology,” BlackRock said in an emailed statement to this publication. 

BlackRock said its China A share ETF strategy for Hong Kong is to provide a choice of exposures for a variety of investors’ needs. It gave examples of its iShares MSCI China Index ETF, which provides the “building block exposure for China in MSCI broad indices”, with the China A share inclusion; the iShares FTSE A50 China Index ETF, “the largest offshore China A-share fund as at today”; and iShares Core CSI 300 Index ETF, which offers a diversified and broad China onshore equity exposure.

While some specific indices and strategies haven’t always panned out, the overall market for exchange traded funds and products has surged in recent years, propelled by rising global stocks and disenchantment among some investors with relatively high-cost active funds (although with recent market pullbacks, the attractions of active management may return). 

According to ETFGI, a firm tracking the sector, assets invested in ETFs/ETPs listed in Asia-Pacific (ex-Japan) increased by a record $34.8 billion during the first 11 months of 2017, the greatest annual increase on record, to reach a new high of $164 billion at the end of November. Assets invested in ETFs and ETPs increased by 26.9 per cent, from $130 billion at the end of 2016.