Expanding our Morningstar ETF Research footprint to the Asian markets, our Global ETF Research Team has launched research reports on individual exchange-traded funds (ETFs) representing over 85% of total ETF AUM for those ETFs listed on the Hong Kong and Singapore exchanges. The overarching goal of our research reports on individual ETFs is to provide a broad spectrum of investors with a useful form of distilled due diligence that contains all of the relevant qualitative context and data needed to put ETFs to best use within their portfolios, or those of their clients. This research is the first of its kind in the Asian ETF market.
Click here to see an example, Tracker Fund of Hong Kong.
These research reports will initially be available free of charge on Morningstar’s Hong Kong and Singapore Websites, i.e. asiaapi.morningstar.com and sg.morningstar.com. Moving forward, our Global ETF Research Team will continue to offer independent research views on an expanding spectrum of ETFs in terms of exposures and types. Please come back to visit our websites for regular updates to our research.
At the moment, there are no plans to develop an ETF-specific rating for the Asian market. The Morningstar Star Rating will continue to be applied to ETFs to facilitate cross-comparability across a broad range of investment vehicles including funds, ETFs, and closed-end funds.
What follows is an overview of the broad outline of our ETF research reports:
Suitability
The suitability section outlines the best uses of the product in an investor’s portfolio depending on economic circumstances, portfolio focus, and investment outlook. Here, we address whether a product is a core building block or a tactical tool, or, in many instances, when and how it can be used as either one. We also surface the complexities of more exotic products like commodity, leveraged, and inverse ETFs.
Fundamental View
The fundamental view section provides a broad overview of the underlying macroeconomic fundamentals that will affect the product’s performance. Most reports will also address recent valuations of the underlying index in this section, though this will be omitted for some alternative asset classes and strategy-based products.
Index Construction
The index construction section peels back the product label to examine the nuances of the underlying index or reference asset. These features include weighting methodologies, caps, free float adjustments, re-balancing and review periods, dividend treatment, and eligibility criteria—amongst others.
Product Construction
The product construction section defines how the product is built to replicate or otherwise provide the performance of its reference index or asset. Here, we examine replication methods (physical, synthetic), product structure (funds, notes), sources of counterparty risk, measures used to mitigate counterparty risk, dividend distribution policies, and more.
Fees
The fees section explicitly states the product’s all-in expense ratio and frames it within the range of those levied by the most directly comparable competing ETFs.
Alternatives
The alternatives section aims to place the product within its appropriate context in the broader range of investors’ choices. The product will be compared on the basis of explicit carrying costs and trading costs to the most directly comparable ETF alternatives. The product will also be compared to other non-ETF alternatives. For instance, we will compare the relative merits of owning a physically-backed gold ETF to owning physical bullion outright.
You can find a full list of ETFs that currently have Morningstar Research Reports by clicking here. You can also access our Research Reports with a simple search by either name, ticker or ISIN and click that product's Analyst Research tab. You can begin your search by clicking here (Hong Kong) or clicking here (Singapore).
Also, visit Morningstar's ETF Centre (Hong Kong or Singapore) for data, commentary and research on these exchange-traded funds.
Ben Johnson is a Director of European ETF Research and Jackie Choy is an ETF Strategist with Morningstar
