00:00Why list it here if I can buy it any way where you are? That's my first question.
00:05Sure. Annabelle, David, thank you for having me. Delighted to be here with you.
00:10You know, we're delighted to be expanding our partnership with ICBC and launching K-Web in Hong Kong.
00:19This really completes the link, if you will.
00:23K-Web is already listed in New York and in London.
00:26And now we have really nearly continuous global access to K-Web around the globe, irrespective of region or time zone.
00:36And that's something that we've been wanting to accomplish for a long time.
00:39And here we are.
00:42What's the rationale for Hong Kong specifically, aside from closing that loop in terms of access throughout the different time zones?
00:49But Hong Kong, of course, this is the market where a lot of these names are already listed.
00:53You can get direct direct access. And there's other similar products in the market as well.
00:59Well, we think K-Web has been recognized as one of the most efficient and effective ways to gain access to China growth,
01:06as indicated by its status in the U.S. as the largest China-focused ETF in the U.S.
01:15And also by the flows that it's attracted this year.
01:19We've seen about $3 billion of net new flows across our U.S. and London-based versions.
01:28And, you know, we think by giving this new access in Hong Kong, it potentially opens it up not just today,
01:36but sometime down the road for ETF Connect.
01:39And that gives Southbound money the ability to potentially purchase K-Web from Hong Kong, you know, over some period of time.
01:49It's not there yet, but it can get there over time.
01:53Jonathan, talk to us about the partnership with ICBC. How do they come in here?
01:57Absolutely. So we've done other things, and ICBC has been a sub-advisor on some of the funds that we manage in Europe.
02:08And so now we thought we would expand on that and have a fund together in Hong Kong.
02:15So we're really excited about what we're doing.
02:18We're continuing to do more with them.
02:20And we think it's really exciting because we can work together here, leveraging the great work and 12-year history we have in managing K-Web,
02:29but at the same time leveraging their brand knowledge and expertise in the region.
02:36Do you have a target on inflows and what you're expecting there?
02:42Well, it's interesting, right?
02:44We've seen a lot of demand this year for K-Web, particularly out of EMEA and Latin America.
02:52So a large part of that $3 billion I talked about came from that region.
02:58Now, mind you, we started with a fairly significant base.
03:01You know, K-Web now collectively is over $10 billion, but it was still very sizable at the beginning of the year.
03:09But we have high ambitions.
03:11I'm going to resist in giving you a specific number, but I'd be really disappointed if we didn't make significant inroads based on this launch and the timing
03:23and also our excitement and enthusiasm for the performance potential of the names inside of the K-Web basket.
03:29There are about 30 companies, and even though it's called China Internet and e-commerce,
03:33it's a little bit of a misnomer because so many of those China Internet names are really AI companies, if you think about it.
03:41Jonathan, I understand you can't give a specific number or a specific target.
03:45What about a range then?
03:47Could you share that or whether you think it's going to be comparable then to the inflows you've already seen in EMEA, for instance?
03:55I think they'll be smaller just because this is a new strategy.
03:58But, you know, we're very enthusiastic.
04:01We think that it can be sizable and reach scale very quickly, and we have high expectations, say, 12 months out,
04:13in large part because we think some of the challenging years that we've seen in performance,
04:17keep in mind that K-Web's prior high was back in 2021.
04:22We're starting to see a good move in terms of geopolitical risk, but also the earnings and the valuations of these companies.
04:31If you think about K-Web from a valuation standpoint, we have PEs of 18 times, whereas U.S. technology is trading at 33 times.
04:39So global investors are starting to realize that there's a lot of value to be had here.
04:46And if you consider that some of our top names, names like Alibaba and Tencent, had revenue growth of 15 percent in the third quarter,
04:54this is really a unique period of time to invest in this segment.
04:59And not just, you know, we would never suggest somebody putting all their money in a strategy like K-Web,
05:05but as a diversifier to what many hold today, which is a large overweight to U.S. technology.
05:14Yeah, well, if only a call-and-call strategy was available.
05:17Oh, you guys have that.
05:19There's the flag, Jonathan.
05:20Well, thank you.
05:22Just to also ask you, since you brought up the appetite and demand for exposure to Chinese tech specifically,
05:31and I wonder, so we don't have the valuation discrepancy, right?
05:35Let's call it they're trading at half what you have in the U.S.
05:39I wonder how that message is resonating with U.S.-based investors compared to how it resonates here in the Asia-Pacific.
05:46Are you seeing the same amount of appetite and gusto for exposure to Chinese equities there?
05:53It's definitely moving west.
05:56We still know that a significant portion of institutional investors, U.S.-based institutional investors, are underweight China.
06:04And they're slowly bridging that gap because being underweight China over the last few years was a way of generating alpha.
06:11In a year like this year, it's a way of underperforming.
06:15So investors are being forced to revisit their China underweights and ads slowly.
06:20And K-Web is a beneficiary of that because it's one of the better-performing China strategies.
06:26It's also very large, has significant volumes and tradability.
06:31So we're seeing that gap narrow.
06:34But the U.S. investor is not yet at a point where they are either neutrally weighted to China or overweight.
06:42That's actually the opportunity.
06:43Investors are watching the performance.
06:46They're watching the impact and the opportunity cost of not being fully invested.
06:52And they're starting to make those types of moves.
06:55So we expect the trends that we saw starting in Asia, moving to Europe and Latin America, we expect those to appear in the U.S. here in 2026.
07:04So can we talk about the pricing as well?
07:11Because how are you looking to price this?
07:14We know that Hong Kong ETFs can be more expensive than those that are listed in the U.S. in particular.
07:20But how does your pricing compare to what you see from other ETFs in this market, for instance, from CSOP or iShares?
07:27Well, what we've done here is created a consistent experience.
07:33We've priced K-Web in Hong Kong consistently with how it's priced in the U.S.
07:37So our management fee is 68 basis points.
07:40We think this is very competitive and compelling given the value we've produced.
07:47Jonathan, final question for you.
07:48Apart from this, give us a preview.
07:51What's cooking in your kitchen for next year?
07:53What's big for you guys?
07:56Well, look, we continue to focus on innovation.
08:00Obviously, K-Web is part of our franchise strategy.
08:04But we're doing a lot in the AI space.
08:07So K-Web is an example of having exposure to AI within a China-focused portfolio.
08:15But we're also – we've launched strategies in the AI space that combine public and private investments, for example, in an ETF.
08:24And we've also launched the first U.S. ETF focused on humanoid and embodied AI.
08:32And we've launched that in London as well.
08:35And that's called COID.
08:35So we think that whether you're gaining various AI exposures through K-Web or through ETFs that combine public and private investments or even going a step further to embodied AI, we think that these are really important trends to capitalize on.
08:55And not just short-term trends but really megatrends that will play out over a period of 10 to 20 years.
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