Van Eck Associates Corporation is currently negotiating with a China-headquartered asset manager to serve as sub-advisor for the Market Vectors® China ETF (NYSE Arca:PEK®), it was announced today. The sub-advisor expects to receive its Renminbi Qualified Foreign Institutional Investor (“RQFII”) quota soon which, pending approval by the Board of Trustees of Market Vectors ETF Trust, would allow PEK to have direct access to physical A-Shares and provide enhanced access to the Chinese equity markets.
“PEK’s prospectus has allowed for an RQFII sub-advisor for some time, so we are excited that the Chinese market has finally opened up so the Fund can pursue utilizing this type of arrangement”
PEK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the CSI 300 Index. The Fund gains exposure to the China A-share market by investing in swaps that are linked to the performance of China A-shares and may directly invest in China A-shares through a sub-advisor’s A-share quota.
PEK celebrated its three-year anniversary last month as the first U.S.-listed ETF to provide exposure to China’s A-Shares market. The Fund, which launched on October 13, 2010, had approximately $34.0 million assets under management (AUM) as of September 30, 2013.
“PEK’s prospectus has allowed for an RQFII sub-advisor for some time, so we are excited that the Chinese market has finally opened up so the Fund can pursue utilizing this type of arrangement,” said Amrita Bagaria, ETF Product Manager with Market Vectors.
The A-Share market was originally open to only domestic People’s Republic of China (“PRC”) citizens. However, beginning in 2002, foreign investors were given access to the A-Share market via the Qualified Foreign Institutional Investor (“QFII”) quota program. The RQFII quota program was later introduced by the Chinese authorities in December 2011 and allows Hong Kong subsidiaries of fund management companies and securities houses from mainland China to launch RMB investment products in Hong Kong and invest in securities listed in mainland China.
The CSI 300 Index is a modified free-float market capitalization weighted index compiled and managed by China Securities Index Co Ltd. The CSI 300 is a diversified index consisting of 300 A-share stocks listed on the Shenzen and/or Shanghai Stock Exchanges. A-Shares represent equity securities of companies incorporated in mainland China. These shares are denominated in Chinese Renminbi (“RMB”), and trade on the Shenzhen and Shanghai Stock Exchanges.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $23.4 billion in assets under management, making it the seventh largest ETP family in the U.S. and tenth largest worldwide as of September 30, 2013.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $32 billion in investor assets as of September 30, 2013.
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The Fund currently does not invest directly in China A-shares but gains exposure to the China A-share market by investing in swaps that are linked to the performance of China A-shares. An investment in the Fund involves a significant degree of risk, including, but not limited to, the following: The Adviser’s ability to manage the Fund will depend upon the availability of China A-shares and the willingness of swap counterparties to engage in swaps with the Fund linked to the performance of China A-shares. A counterparty’s inability to continue to enter into swaps with the Fund could have a material adverse effect on the Fund. The Fund may suffer significant losses if a swap counterparty fails to perform its obligations under the swap as a result of bankruptcy or otherwise. Given that, at present, there are only a limited number of potential counterparties willing and able to enter into swap transactions linked to the performance of China A-shares, the Fund may enter into swap transactions with as few as one counterparty at any time. Swaps in which the Fund will invest may need to be reset on a regular basis which may increase the likelihood that the Fund will generate short-term capital gains and/or ordinary income. See “Principal Risks of Investing in the Fund-Risk of Investing in Swaps” and “Shareholder Information-Tax Matters” in the Fund’s prospectus for a further discussion of these and other risks of investing in the Fund.