In recent years, there has been a significant shift in the investment landscape, particularly in the realm of exchange-traded funds (ETFs), particularly in the context of China's financial marketRecent data from Wind reveals a groundbreaking milestone: on November 12, 2024, the first ten China Securities A500 ETFs collectively exceeded a whopping one trillion yuan in scale, accomplishing this remarkable feat in just 21 trading daysThis achievement not only highlights the swift growth of the ETF market but also sets a new record for the fastest ETFs to reach this threshold historically.

Investors today are increasingly drawn to passive index funds for their transparency, low costs, and straightforward operationWind data indicates that in the current year alone, ETFs have attracted nearly 1.6 trillion yuan in net inflow, leading to a total market size exceeding 3.58 trillion yuanNotably, equity ETFs dominate this landscape, making up a remarkable 80% of total assets, with broad-based ETFs reigning supreme and bringing in a net inflow of 1.25 trillion yuan this year aloneThis trend underscores the growing appreciation for broad-based indices as viable investment options.

Broad-based indices are appealing for various reasonsThey provide investors a robust means to mitigate risk through diversification, as they do not limit exposure to specific sectors or investment themesAs of November 22, 2024, a staggering 250 broad-based ETFs are available in the market, with six of them boasting over a trillion yuan in assetsAmong these, the China Southern Asset Management’s CSI 300 ETF has emerged as a key player—it is one of the largest and most established core broad-based ETFs on the Shenzhen Stock ExchangeReflecting on the historical timeline, China Southern Asset Management is regarded as one of the pioneers of index investing in the country, adeptly aligning its growth trajectory with the overall evolution of index-based funds and ETFs on a national scale.

Established as one of the earliest firms to engage in index investing in China, China Southern Asset Management not only has the monumental CSI 300 ETF but also offers a plethora of market-leading products

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These include the highly liquid CSI A500 Index ETF, which has scaled over 10 billion yuan in assets, and the most sizable Sci-Tech Chip ETF in the marketThis robust product lineup is designed to cater to the varied asset allocation and investment desires of a broad spectrum of investors.

As of now, China Southern Asset Management’s total asset management size for non-monetary public funds has reached an impressive 696.875 billion yuan, with their non-monetary ETF segment exceeding 230 billion yuan—a significant increase compared to the end of the previous yearThe firm has established a portfolio of 45 stock ETFs to respond to the rising investor interest in passive managementThe standout products among their offerings include the large-cap blue-chip CSI 300 ETF, the mid-cap growth-focused CSI 500 ETF, and the newly launched CSI A500 ETF established on September 20.

The CSI 300 ETF, with a fund code of 159919, is a cornerstone of the A-share market, representing core assets that reflect the overall performance of the Shanghai and Shenzhen stock exchangesLaunched on May 7, 2012, it has become one of the first cross-market broad-based ETFs in China and continues to dominate in scale on the Shenzhen Stock ExchangeAs of November 22, the CSI 300 ETF achieved an asset size of 972 billion yuan, leading among broad-based ETFs, with a remarkable growth of 111.974 billion yuan this year alone.

Similarly, the CSI 500 ETF (159922), which began its journey on February 6, 2013, currently stands as the second largest in its category with an asset size of approximately 12.354 billion yuan, marking it as the largest and most liquid CSI 500 ETF on the Shenzhen marketMeanwhile, the CSI A500 ETF (159351) stands as a recent addition that embodies the new opportunities arising in today’s dynamic economyThis ETF uses a balanced sampling method to select 500 leading companies from various sectors and has garnered impressive market recognition with its assets surpassing the 10 billion yuan mark just weeks following its launch on October 15.

The “core-satellite” investment strategy has become a widely adopted method among ETF investors

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It typically involves allocating the core portion of the investment to broad-based ETFs, aiming for market returns, while utilizing the satellite portion for investments in high-growth sectors or thematic ETFs for potential excess returnsChina Southern Asset Management is expanding its horizons beyond broad-based indices into category-specific ETFs, cross-border indices, and strategic index ETFs, with notable products such as the Sci-Tech Chip ETF (588200), Green Power ETF (159625), and State-owned Enterprise Innovation ETF (515680). Additionally, they have brought forth cross-border ETFs tracking indices like the NASDAQ ETF (159501) and S&P Biotech ETF (159502). This extensive offering is fundamentally aimed at enhancing asset allocation for investors.

As the trend of index investing gains traction, the influx of funds into index products is becoming a crucial dynamic for the marketInvestors are increasingly opting for the convenience of trading ETFs as efficient investment vehiclesThe rapid development of ETFs has enriched product categories and expanded market sizesHowever, the performance of similar passive investment products can differ significantly due to factors such as collaborative efforts within the management teams, advanced technological support, tracking errors, investment costs, liquidity, and accompanying investment toolsThese elements can considerably influence the investment experience for an individual investor.

In terms of cost-effectiveness, China Southern's CSI 500 ETF and its corresponding linked fund, along with the CSI A500 ETF and its linked variant, stand out with an exceptionally low fee structure of “0.15% annual management fee + 0.05% annual custody fee”. As of November 23, the fee structure for the CSI 300 and its linked fund has also been adjusted to maintain this low-cost standard, providing critical benefits for investor cost savings.

Moreover, China Southern is proactive in enhancing investor returns through dividend distributions

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Clear dividend policies are in place for the CSI A500 ETF and its linked fund that operate on a quarterly basisThe CSI 300 ETF and CSI 500 ETF also participated in dividend distribution throughout 2024, with the former achieving remarkable recognition for its fourth-largest annual dividend payout of 1.641 billion yuan while the latter boasted an impressive distribution rate of 4.9%—standing out in the broad-based segment.

One of the increasingly vital aspects of index funds is tracking error, particularly in a market landscape where homogeneity is vastChina Southern Asset Management has demonstrated exceptional prowess in tracking error reduction and management, evident in the historical performance of the CSI 300 ETF and CSI 500 ETF, which have maintained tracking errors of only 0.027% and 0.022% respectively over the last three years.

Another noteworthy product in China Southern's offerings is their FTSE China A50 ETF (512550), which has been operational since 2017 and has solidified its position as the largest in its categoryThe firm's long-standing management of this ETF has also contributed to their low error rates and robust operational capabilitiesTo closely align with index performance, they have implemented a market-making system to boost liquidity and minimize deviations between the ETF and its net asset valuesThe fund remains actively managed to reflect real-time redemption conditions, ensuring that the positions are maintained at an optimal level.

In alignment with their mission, China Southern has embedded the principles of team collaboration, systematic support, and procedural management into their investment framework, significantly enhancing the skill and efficiency of their ETF managementAs of December 2023, the index investment team has consecutively received the "Passive Investment Golden Bull Fund Company" award, marking them as one of the most awarded teams in this domain.

In a rapidly evolving market landscape, investor needs become increasingly diverse and demand higher standards for the attributes of index products

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