NYSE Active ETF Updates

Q&A with Matthews Asia

This week we sit down with Michael Barrer at Matthews Asia to discuss their entry into the active ETF market.

Matthews Asia is known for having an unwavering focus on investment opportunities within Asia and for providing active investment solutions for investors. The firm entered the ETF market earlier this year with the launch of three active equity ETFs (NYSE Arca listed, MEM, MINV, and MCH). What led to the decision to launch ETFs and what opportunities do you see in the active ETF market today?

When the ETF Rule was adopted at the end of 2019, it opened the door and afforded the flexibility for bottom-up active managers to offer long-standing mutual fund strategies in the ETF wrapper. There is no denying the growth of ETFs over the past two decades but ultimately our goal is to provide investors a choice in how they gain exposure to the important growth regions of emerging markets, Asia and China through actively managed portfolios that we believe can benefit from our stock-picking heritage.

The early feedback from our investors has been encouraging as they are excited about the option for ETFs at Matthews Asia. We believe it’s still early days for active ETFs with investor adoption and new product development set to accelerate over the coming years. Our long-term plan is to build a robust active ETF suite that delivers increased investment choices for investors.

As an asset manager focused on providing solutions for Asia, what benefits and/or nuances come with operating an active ETF product line-up compared to other investment wrappers or exposures?

There is certainly an expertise required for managing active strategies in emerging markets and Asia, both in investment acumen and market structure. With almost 40 investment professionals, we have deep expertise backed by over 30 years of active investment experience in these markets, which has helped make us a leader in providing active exposures in these geographies. Our active ETF wrapper now gives investors access to several of our strategies in a vehicle that provides full transparency, intraday liquidity, increased tax-efficiency, and at a lower expense ratio.

What are the key considerations for investors contemplating actively managed international equity ETFs?

Investors should first evaluate the manager of a strategy, their track record and expertise in the region. If the strategy is an allocation fit for an investor’s portfolio, then I would look at some of the nuances of the ETF, such as market exposure and tax efficiency. Our ETFs are approximately 50-60% more tax efficient as compared to their sister mutual funds, solely based on the weight of the portfolio of in-kind markets (Hong-Kong, Indonesia, Singapore, Thailand, etc). Finally, investors should look for managers who can help support them in understanding the active ETF structure and partner with them on ensuring they can identify the most efficient ways to trade these ETFs, which is a key focus of my role at Matthews.

Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?

I would make sure they are partnering with custodians, market makers and exchanges who have experience in developing and running these new vehicles. The NYSE has been a tremendous partner to Matthews Asia not only in the pre-launch development phase but also the post-launch market quality and marketing of our first three active ETFs. The bottom line is active ETFs do not change the core of an active manager trying to achieve alpha over the benchmark but allows them to offer their expertise in a more technologically advanced investment vehicle.

Active ETF Stat Pack

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 12/9/2022

*Simple average

Active, Semi-Transparent Update

Source: FactSet & NYSE Internal Database and Consolidated Tape Statistics as of 8/5/2022

*Simple average

November MTD Active ETF Launches

Source: Factset as of 12/9/2022