MyETF-US50 to spur retail interest in ETFs and leverage on US equities

Approximately 30% to 40% of a fund manager’s portfolio goes into ETFs, says CEO

By MARK RAO / Pic By AFIF ABD HALIM

I-VCAP Management Sdn Bhd’s new US dollar-denominated exchange-traded fund (ETF) is geared at increasing retail participation in the market by allowing investors affordable access to the US equity market.

The MyETF Dow Jones US Titans 50 (MyETF-US50) is set to be benchmarked against the 50 largest Shariah-compliant stocks in the US and will represent the first of its kind to be listed on the local bourse.

Newly appointed i-VCAP CEO Khairi Shahrin Arief Baki said the fund will continue to target institutional investors as approximately 30% to 40% of a fund manager’s portfolio goes into ETFs.

“At the same time, we are also focusing on the retail market because this ETF is a listed product and allows retail investors access to US equities with a single investment,” Khairi told members of the press after MyETF-US50’s prospectus launch in Kuala Lumpur yesterday.

“If a retail investor were to invest in 50 names in the US equity market, it is going to cost a lot,” he said, adding that the government has also helped the affordability of ETFs in Malaysia by lifting stamp duties on transactions.

He said the listed unit trust also provides retail investors ample liquidity as they can buy or sell 50 US bluechip stocks in the same basket via investing in the fund.

Presently, over 90% of ETF investors in Malaysia are institutional, while less than 10% are made up of retail investors.

Khairi added that trade volume in the country’s ETF market is not at the desired level and i-VCAP — a wholly owned unit of ValueCap Sdn Bhd — is projected to launch up to six ETFs this year to induce greater ETF participation.

“We need to have more products available in the market, because if you look at developed markets such as the US, ETF issuers come up with a lot of products every year and this has spurred the market.

“i-VCAP is working with more offerings, as well as differentiated products to be launched in the market — and hopefully, this will increase the ETF volume and activity in Malaysia,” he said.

There are nine ETFs currently available in the Malaysian market, five of which are Shariah-compliant. How- ever, there is an absence of US-centric Islamic funds available to the public.

Slated for listing on the Main Market of Bursa Malaysia Securities Bhd on Feb 28 this year, MyETF-US50 has an approved fund size of up to 500 million units at an initial issue price of US$1 (RM3.95) per unit, and will be the first US dollar-denominated Shariah-compliant security listed on the local exchange.

Shariah-compliant futures in ETF trade — namely leverage and inverse funds — have also been identified as a useful platform to boost retail participation in the local market.

“As a group, we are looking to collaborate and partner with other players in the market because leverage and inverse ETFs can create interest and liquidity in the market,” ValueCap group CEO and MD Sharifatu Laila Syed Ali said at the same event.

She added that i-VCAP is the group’s Shariah vehicle, with great potential seen there.

“We are talking to some parties in this regard and to see what else we can do to create interest in the local market.”

i-VCAP head for business development Zulkifli Ishak said the issuer is working with its Shariah advisors to determine if ETF futures are Shariah- compliant, as they will provide an avenue for short-term investments.

“In Taiwan, the ETF market grew after it introduced futures as this gives retail investors room to manoeuvre,” Zulkifli said.

The MyETF-US50 is designed for medium-term investors (between one to three years) and long-term investors (over three years), and aims to provide returns that closely correspond to the Dow Jones Islamic Market US Titans 50 benchmark index, which includes the likes of Apple Inc, Microsoft Corp and Facebook Inc.

The benchmark is closely correlated to Standard & Poor’s (S&P) 500 market index, which measures the performance of the 500 largest companies listed on the New York exchange based on market capitalisation.

Khairi said the S&P index registered a return of 19.4% in 2017 and is expected to grow 15% this year, supported by global growth, higher commodity prices, a weaker US dollar index and moderate inflation.

At the end of November 2017, the global ETF market was valued at approximately US$4 trillion comprising 5,400 ETFs, with the Asia Pacific and Japan market valued at US$160 billion.

The Islamic ETF market was valued at RM360 million and comprised 13 ETFs available globally.