- 2024-06-14
- News
ETF size too small, afraid of liquidation
In the first half of 2024, the dividend sector in the A-share market stood out, with several bank stocks successively hitting historical highs in stock prices, and dividend-themed funds led the market.
Against the backdrop of the "dividend craze" within the year, on July 16th, the GF Securities China Securities Index ETF (hereinafter referred to as "Dividend 100 ETF") issued a liquidation warning due to its small scale (less than 50 million yuan).
Five days later, an urgent announcement was made to convene a holders' meeting to amend the fund contract, making the conditions for fund liquidation more relaxed to avoid being directly liquidated due to a small scale.
There are 40 dividend-themed ETFs operating in the public market, and the Dividend 100 ETF is the only index fund that has issued a warning for being too small to be liquidated.
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According to statistics from Tianxiang Investment Consulting, the latest scale of GF Fund's public funds is 1.4245 trillion yuan, ranking third in the industry.
In terms of index funds alone, GF Fund's fund scale is 193.264 billion yuan, ranking fifth in the industry. At the same time, GF Fund is also a major equity fund, with equity fund scale ranking in the top three in the industry.
The Dividend 100 ETF was established on March 14, 2024, with a fund scale of 510 million yuan. In less than three months, the fund scale fell below 50 million yuan, below the scale liquidation line, and the fund was significantly redeemed, with shares remaining only one-tenth of the time when it was established.
The scale of ETFs is directly proportional to liquidity. Generally speaking, the larger the ETF scale, the higher the liquidity, the smaller the bid-ask spread, and the smaller the tracking error. In addition, a large ETF scale can also avoid the risk of being liquidated due to scale issues.
According to statistics, from July 2023 to now, GF Fund has established 15 ETFs (excluding linked funds, the same below) in nearly one year. Compared with the scale on the first day of listing, the fund shares of nearly 3 ETFs have increased.
The shares of 12 new ETFs have declined, with a decline ratio of more than 50%, including the Dividend 100 ETF, and the fund shares of 7 new ETFs are less than 20% of the scale on the day of establishment. Nearly half of the new ETFs have experienced a significant reduction in scale.Moreover, within a month of the fund's establishment, the fund size plummeted. This implies that most of the capital raised during the fund-raising period was quickly redeemed after the ETF was listed.
The GF China Securities 2000 ETF, GF Xin Chuang 50 ETF, GF Data ETF, and GF Dividend 100 ETF, four index funds established for less than a year, have all seen their latest fund sizes fall below the liquidation threshold of 50 million yuan. The plight faced by Dividend 100 ETF is not an isolated case.
From mid-2023 to mid-2024, among the 38 ETFs established for over a year under GF Fund, 20 have experienced a reduction in shares, accounting for more than half.
During this period, among the top 10 ETFs with the most redeemed shares across the public offering industry, GF Fund alone accounted for 3, the highest number, which are GF Infrastructure 50 ETF, with a net redemption of 2.59 billion shares, GF Power ETF, with a net redemption of 1.6 billion shares, and GF Battery ETF, with a net redemption of 1.578 billion shares.
In contrast, none of GF Fund's products are among the top 10 ETFs with the most increased shares.
According to the contract stipulations of Dividend 100 ETF, if the scale is below 50 million yuan for 50 consecutive working days, the fund will face the risk of liquidation, which triggered the operation to amend the fund contract to preserve the fund this time.
However, there is also a protection for mini-sized funds to avoid liquidation because the requirement is to be below 50 million yuan for 50 consecutive working days; as long as the scale exceeds 50 million yuan for a few days in between, it can avoid triggering the liquidation condition.
The GF China Securities Science and Innovation Entrepreneurship 50 Enhanced Strategy ETF (referred to as "Dual Innovation 50 Enhanced ETF"), with the latest share of 1,100 thousand yuan, will see a brief surge in scale exceeding 50 million yuan after operating for nearly 50 working days, then quickly fall back to its original scale, making the scale trend resemble an electrocardiogram.
Although the Dual Innovation 50 Enhanced ETF's scale is mostly less than 20 million yuan for most of the time, it still does not trigger the liquidation condition.
However, the small scale and low liquidity can easily amplify the trading errors of ETFs, and the threat of liquidation due to small scale has not been completely eliminated.GF Fund's multiple passive funds are troubled by scale issues, and the scale of their strong suit, active equity funds, is also continuously declining.
In the first half of 2024, the scale of GF Fund's active equity funds decreased by 11.5 billion yuan to 161.6 billion yuan, experiencing a decline of more than 10 billion yuan for three consecutive quarters, with a cumulative decline of 41.6 billion yuan, a drop of 20.47%, which is the highest proportion among the top twenty fund companies.
Previously, GF Fund has long maintained its position as the third in the active equity industry, but in the latest Q2, it was surpassed by FuGuo Fund, and the gap with the following JingShun Great Wall and HuaTianFu has also narrowed to within 15 billion yuan.
According to statistics from Haitong Securities, as of the middle of 2024, the average return of GF Fund's active equity funds in the past year is 11.48%, and the average return in the past two years is 16.37%. Among all 24 large and medium-sized equity fund companies, the ranking is the last.
Fund companies play a key role in the protection of financial consumers, and investors are also voting with their shares, grading the work of fund companies for investor rights.
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