ETF Excellence

 

ETF Excellence

By John Cheung

BlackRock tells BENCHMARK about iShares and its ETF investor education efforts.

 

As the world’s leading ETF provider, BlackRock is spearheading ETF activity in Asia with the creation of innovative products and investor education initiatives. The firm wowed the judges, taking home seven awards at the BENCHMARK Fund of the Year Awards gala dinner. Its crowning glory was winning best-in-class awards for its Asia Ex-Japan Equity – ETF and its ETF investor education efforts, validating the quality of its ETF expertise as it encourages ETF adoption in Asia.

iShares

iShares, the ETF business of BlackRock, manages more than US$914 billion in assets (as of 31 December 2013). Its iShares RMB Bond Index ETF, launched in June2013, was the first RMB bond ETF in Hong Kong. Jane Leung, managing director at BlackRock and head of iShares Asia Pacific, said, “I think it filled a need that was out there from investors looking to invest in offshore RMB bonds. The ability to be able to access that market in a transparent and cost effective way was something that were ally felt was missing in the market.”

At the core of iShares’ methodology is choosing indexes that are liquid and transparent. Leung noted that liquidity was especially important, as it ranks among clients’ primary concerns. “iShares specifically has a capital markets team that is dedicated to building liquidity in the market. They spend all of their time making sure that there are multiple market makers and high degrees of liquidity within the market and all the ETFs that we provide,”said Leung.

The firm chose to provide investment results that closely correspond to the performance of the Citi RMB Bond Capped Index because it has had an active dim sum bond desk for quite a while. Leung explained, “We knew that the trading would be quite active and the data would be accurate. From there,we looked at the index methodology to find a methodology that is transparent,easy to follow and easy to replicate; and also one that has liquidity screens because fixed income can often be a bit difficult to access in an illiquid market. Putting in liquidity screens made the index and the ETF more liquid and easy to trade.” Thus far, Leung notes that the RMB Bond Index ETF has done quite well, delivering benchmark performance.

Investor education

BlackRock has undertaken an ambitious investor education initiative. In 2013, it held seminars and education events for 50 clients from Asia to engage investors and increase their awareness about ETFs. “As this is a new asset class and a new ETF investment tool,we really felt that it was important to spend the time to do the education for investors,” Leung said.

Its investor education campaign emphasizes three core pillars: responsible innovation,professional quality and individual choice. Its mission is to make investing clearer, fairer and more efficient, deliver quality products that can help investors navigate today’s volatile markets and help investors execute investment ideas with insight and support. In line with this, when iShares embarked on its five month advertising campaign, Leung remarked that the firm had spent a significant amount of time tailoring its education efforts to the local market. “We make an effort to be very local in the markets so that we can provide the best services to our clients,”she said.

Besides its print, digital and bus advertisements, BlackRock launched the RMB Bond ETF Education Centre, a web-based education portal. It uses a combination of videos, articles and market data to provide investors with product and market information, as well as solutions and strategies from investment and industry experts. It aims to maintain an objective and balanced voice in promoting ETFs to encourage investors to make informed investment decisions.

The site’s animated and commentator videos address common investor questions and explain how to invest in the RMB bond market through ETFs. “We describe it as really trying to show investors pictorially how they can invest and what the benefits of investing in an ETF based on RMB bonds can be like. Putting it in a very user friendly and easy to understand format was the best way to describe what is still a relatively unknown investment product,” said Leung.

Conjunctively, BlackRock maintains the iShares Hong Kong YouTube channel to cross-promote its videos, reaching an even broader audience. Thus far, the videos have been extremely popular, with more than 100,000 views.

iShares’ capital markets team also adds a personal touch to investor education by reaching out directly to clients with ETF-related educational materials and market update and outlook news, where appropriate. Further, its dedicated team of ETF specialists support and advise clients in the use of ETFs.

In 2014, Leung said iShares will be expanding its investor education efforts by venturing into ETF topics that are less well known, such as fixed income, while also educating clients in the region about its global products.BM