What’s next in the fee fight for Hong Kong ETFs?

Hong Kong’s financial market will experience competition for the fees among the newly approved Bitcoin and Ethereum exchange-traded products (ETFs). These funds, are licensed by SFC and scheduled to start trading on April 30, 2024. 

The approval covers three ETFs of China AMC, Harvest Global Investments, and a joint venture of Bosera and HashKey Capital. All these funds will be deposited with the Bank of China International-Prudential Trustee Limited (BOCI-Prudential) as the custodian. The objective is to reflect the performance of Bitcoin and Ethereum, which draws on the CME CF Bitcoin Reference Rate and the CME CF Ether-Dollar Reference Rate, respectively.

Fee competition heats up with Hong Kong ETFs

The ETFs are priced differently based on their management fee structures, which have been developed to attract investors from different segments of the market. China AMC announced a management fee of 0.99%. On the other side, Bosera and HashKey charge their fees at 0.6%. What distinguishes Harvest Global Investments is that it provides a six-month fee waiver and thereafter charges only 0.3% fees, which is a very low fee compared to other fund managers. It could spark cutthroat competition between issuers trying to clinch a big share in Hong Kong’s emerging digital asset market.

James Seyffart, a Bloomberg Intelligence analyst, mentioned the possibility of price competition in the industry. He emphasized the impact that Harvest’s aggressive pricing strategy would have on Hong Kong’s digital assets pricing norms. These financial products are literally the first to be introduced in the adjacent Asian market that is open to innovative financial products.

A potential fee war could break out in Hong Kong over these #Bitcoin & #Ethereum ETFs. Harvest coming in hot with a full fee waiver and the lowest fee at 0.3% after waiver. Tables are from my colleagues @RebeccaSin_SK & @thetrinianalyst! pic.twitter.com/zI1XobrTwZ

— James Seyffart (@JSeyff) April 24, 2024

Hong Kong ETFs pioneer web3 investment solutions

Zhu, the China AMC Head of Digital Assets and Family Office Business, says these ETFs provide a safe and efficient investment channel for both retail and institutional clients. They enable the community to interact with virtual assets in a regulated environment. Besides, Zhu pointed out the “in-kind” nature of these ETFs, in which coin holders can effortlessly convert their assets into regulated ETFs.

These products also support the overall goal of Hong Kong to create a vibrant web3 network. The launch of the ETFs is forecast to lead to the creation of new strategies in the digital asset management space and set benchmarks for the performance of popular cryptocurrencies in regulated investment formats.