Vanguard Group has decided to include A shares from mainland China in its main emerging markets fund, making it the first major emerging markets fund to include the shares and possibly prompting a wave of similar moves from other funds.
Vanguard, with $3.3 tn in assets under management, will add shares traded in Shanghai and Shenzhen to its Emerging Markets Stock Index Fund, which it says is the world’s largest emerging markets exchange-traded fund. The firm says China A shares will have a weighting of 5.6 percent in the $69 mn fund.
‘As the first major emerging markets fund to add exposure to China A shares, the fund will benefit investors with more diversification, deeper emerging markets exposure and greater access to the growth potential of Chinese equities,’ says Vanguard CEO Bill McNabb in a press release announcing the move.
The development follows the decision announced on May 26 by the FTSE Group to launch another emerging markets index, with a weighting of about 5 percent in China shares. That index will be run in addition to the existing FTSE emerging markets index.
‘The transition to include A shares in global portfolios is now beginning and we will support this transition while ensuring all users of our global benchmarks have sufficient time to manage the change,’ said Mark Makepeace, chief executive of FTSE Russell, in announcing the change.
The Emerging Markets Stock Index Fund will use the new FTSE index as a benchmark, Vanguard says.
‘To see somebody adopting it within the week is very, very important indeed,’ says John Kennedy, investment director of Harvest Global Investments (UK), in an interview with the Financial Times. ‘It will have quite an impact because [Vanguard is] a very prominent provider. I would expect others to follow.’
