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I recently described a 62/38 weighting as a compliance constant wearing an index methodology’s clothes. It turns out it is not a constant at all. It is a floor with a cushion, and every issuer gets to choose the size of the cushion.
ChinaAMC HK-US HALO ETF (3479, HKEX)
HALO stands for Heavy Assets, Low Obsolescence, which is the investment industry's way of saying “things AI cannot make redundant". Think power, materials, industrial kit and the physical plumbing of data centres. The issuer calls it Asia's first ETF on the theme.
The index holds 60 companies, 30 listed in Hong Kong and 30 in the US. Hong Kong gets 62 per cent, the US gets 38. You will recognise the numbersHere is where they come from. To qualify for Southbound ETF Connect, an ETF's benchmark needs at least 60 per cent of its weight in Hong Kong-listed stocks, and on review the ETF becomes sell-only onlyif that drops below 55. So 62 is the rule plus a two-point buffer against drift. Not a view on where heavy assets live. A view on where mainland money is allowed to go.
The launch material is candid about it, saying the funds were built “with a view to meeting" ETF Connect eligibility. The door does not open straight away, mind you. Eligibility also requires six months of listing history and an average of HK$1.7 billion in assets. These funds have been designed for a room they cannot yet enter.
ChinaAMC Franklin HK-US Equity Cash Flow Focus ETF (3520, HKEX)
Same issuer, same batch, same cross-border idea, different cushion. This one tracks a Solactive index of 20 Hong Kong-listed names and 80 US-listed names, with a target split of 60 per cent Hong Kong and 40 per cent US.
Do the division. Twenty Hong Kong companies share 60 per cent of the portfolio, averaging three per cent each. Eighty US companies share the other 40, averaging half a per cent. A Hong Kong constituent carries, on average, roughly six times the weight of an American one, in a fund whose selling point is a consistent cash-flow screen applied equally across both markets.
The screen is equal. The weights are not. And this time the cushion is zero: 60 is the line, and the index sits on it.
ChinaAMC Franklin FTSE Innovative Drugs ETF (3525, HKEX)
The third variant. 30 Hong Kong-listed drug developers, 70 from developed markets, target weights of 65 and 35. Traditional Chinese medicine is excluded, and so are the outsourced drug-service providers; weights tilt towards companies that spend most on research.
So in one listing wave, one issuer has produced 62/38, 60/40 and 65/35. The number moves. The floor underneath it never does. If you are building data models for this corner of the market, the useful field is not the theme. It is the Hong Kong weight, and how far above 60 it has been parked.
iMGP DBi Absolute Return ETF (DBAR, NYSE)
The name says absolute return. The prospectus objective says “long-term capital appreciation". Those are not quite the same promise, and the gap between them is where the interesting part lives.
The fund targets 100 per cent exposure to a managed-futures strategy and, on top of that, 30 per cent exposure to US large-cap equities. That is 130 per cent notional, and a permanent slice of stock market-beta, inside a product called absolute return. It is less a hedge fund replicator than a hedge fund replicator with a portfolio of US equities bolted to the side.
The managed futures engine is the same approach behind DBi's much larger sibling, which has become the biggest fund in its category. It looks at the trailing sixty days of performance of a pool of the largest CTA hedge funds and builds a futures book that would have produced similar returns. The prospectus is refreshingly blunt on one point: the sub-adviser “does not have discretion to override the model". Nobody in the building is allowed to have an opinion.
Two housekeeping notes. The prospectus names NYSE Arca as the listing venue while listing data points NYSE. And when I checked, the fee table in the filing was still blank and the issuer's fund page was a shell with empty fields for ticker, inception date and expense ratio. The fund exists in the data before it exists on its own website. Not for the first time.
Jensen US Quality Index ETF (JQTY, NYSE)
Jensen has spent more than three decades as an active manager built around one idea: good businesses earn high returns on equity for a very long time. It has now written that idea down as a rule and handed it to an index calculator.
The rule is strict. A company needs a return on equity of at least 15 per cent in every one of the last ten fiscal years. Fewer than 315 US companies pass. The index takes the 100 largest by free-float market cap, weights them with a modified cap methodology, and rebalances twice a year. VettaFi does the calculating. The reported fee is 25 basis points.
There is something quietly admirable about this. The firm's active ETF runs a concentrated book of 25 to 30 names. The index holds 100. So the house has effectively separated its philosophy from its stock picking and priced them differently. The philosophy is now available at 25 basis points. The judgement costs extra.
Arrow Bitcoin EUR Hedged ETC (EBTC, Euronext Paris)
A euro-hedged bitcoin product. Let that settle for a moment.
On any given day, EUR/USD might move a fraction of a per cent. Bitcoin can move several per cent before lunch. Hedging the currency on a bitcoin position is a bit like fitting a seatbelt to a passenger who has already jumped out of the plane. It removes a real risk, technically. Just not the one anybody was worried about.
To be fair, the logic holds for a euro-based investor who wants the dollar price of bitcoin and nothing else, and currency-hedged gold has been a sensible product for years. Bitcoin is simply a much louder asset, and the hedge is a much quieter instrument.
Schroder USD Investment Grade Corporate Bond Active UCITS ETF (SUIG, London Stock Exchange)
Among all this, Schroders listed an actively managed dollar investment-grade corporate bond fund. Its sibling in the same wave is a CoCo fund whose ticker is, with admirable economy, SAT1.
The bond fund is exactly what it says. Dollar credit, investment grade, somebody paid to avoid the ones that go wrong. No cross-border quotas, no model that cannot be overruled, no hedge on the wrong risk.
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