Matthews Asia plans to convert $80mn Korea Fund to an ETF

Matthews Asia plans to convert its $80mn Korea Fund into an ETF, a filing shows.

All or substantially all of the fund’s assets are expected to move into the newly formed Korea Active ETF, the manager has disclosed.

The fund’s board expects to consider the conversion in early 2023, according to the filing. If the board approves the plan, the fund will be converted to the actively managed ETF sometime this year. The disclosure did not reveal when the board meeting was due to take place and included no further details about the timeline.

The firm does not expect the conversion to require shareholder approval, the filing notes.

The forthcoming ETF will be managed in a substantially similar manner to the existing mutual fund, with identical investment objectives and fundamental investment policies and substantially similar investment strategies, according to the disclosure.

This is Matthews Asia’s only fund focusing on growth opportunities in the South Korea market, according to its website.

The filing does not state whether the fund’s expense ratios would change as a result of the change. The mutual fund version carries a management fee of 66 basis points and total expense ratio of 113 bps, a prospectus shows.

The firm did not respond to a request for comment before publication.

Matthews Asia entered the ETF space in July with three active ETFs focusing on global emerging markets, Asia and China. In January, the firm rolled out its fourth ETF, an actively managed emerging market ETF that excludes China.

Together, the original trio of ETFs has $121mn in assets, according to Morningstar Direct. Those funds are the $105mn Innovators Active ETF, $10mn China Active ETF and $6mn Emerging Markets Equity Active ETF.

All four ETFs, including the newly launched Emerging Markets ex China Active ETF, cost 79 bps, a prospectus shows.

Matthews Asia’s chief executive recently said that the firm would be expanding its active ETF line-up.

“I think this is a moment when, by and large, allocations towards emerging markets, towards Asia and towards China are pretty low, maybe at all-time lows,” Cooper Abbott, chief executive of Matthews Asia, told Ignites. The company sees interest around the ETF vehicle, however, especially for products that are actively managed, he added.

Matthews Asia’s $10.3bn mutual fund line-up leaked $5.9bn last year, according to Morningstar Direct.

In early 2021, Guinness Atkinson became the first fund sponsor to convert mutual funds into ETFs. Dozens of funds have followed suit.

Several firms have mutual fund-to-ETF transformations in the pipeline. For example, JPMorgan Asset Management plans to switch a batch of four mutual funds into ETFs in March. Fidelity Investments, meanwhile, expects to change six mutual funds to ETFs in June. And Franklin’s first in-house mutual fund-to-ETF conversion is set to take place this year. Franklin affiliates Brandywine Global Investment Management and Martin Currie have already each turned a mutual fund into an ETF.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.

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