First Batch of Active ETFs Nears Launch as Fund Companies Prepare

The countdown to the launch of China's first batch of actively managed exchange-traded funds has begun, with preparatory work advancing across the industry. Regulators and fund companies alike are treating the debut as a priority, with final compliance checks and system testing now under way. Exchanges, fund companies and broker channels have started pre-launch promotion, including investor education articles, brand marketing, product planning, investment operations, subscription and redemption mechanisms, and disclosure arrangements. Business lines across fund companies are paying close attention to active ETFs.

Fund manager line-ups for the first 18 active ETFs split evenly between two approaches: discretionary stock selection and quantitative stock selection. On the discretionary side, several fund companies have assigned their most representative active equity managers. Huaxia Fund plans to appoint Wang Junzheng, a manager overseeing RMB 10 billion in assets, with a value-oriented style. Yongying Fund plans to appoint Xu Tuo, known for cyclical and growth investing, with a prosperity-cycle strategy. Morgan Fund, the only foreign-invested manager in the pilot, plans to appoint Li Bo, with a balanced growth-leaning style. Huatai-PineBridge Fund plans to appoint Yang Jinghan, a deep-value manager. Ping An Fund plans to appoint Liu Rongjun, whose strategy pairs a dividend base with technology-growth exposure for return elasticity.

Because active ETFs must support on-exchange trading, some fund companies using discretionary strategies are pairing their active equity managers with index fund managers who have ETF experience, adopting a dual-manager structure. Yongying Fund, in addition to Xu Tuo, plans to appoint Cai Luping, head of the company's index and quantitative investment department, as co-manager. Ping An Fund also plans to pair Liu Rongjun with ETF manager Li Yan. In the dual-manager structure, the active equity manager leads stock selection and investment strategy, while the ETF manager handles creation and redemption list preparation, in-kind subscription and redemption, and on-exchange trading execution.

Some companies have gone directly to quantitative managers with both ETF and active quantitative experience. Fullgoal Fund plans to appoint Wang Baohe, head of its quantitative investment department, who has managed traditional ETFs, index-enhanced ETFs and off-exchange active quantitative funds. China Universal Fund plans to appoint Wu Zhenxiang, deputy head of its index and quantitative investment department, who has ETF and index-enhanced strategy experience; his CSI 300 Anzhong Dynamic Strategy fund has outperformed its benchmark for consecutive years.

Active ETF operations place higher demands on investment, trading, operations and risk-control systems. Beyond routine creation and redemption list preparation, cash position management, market maker coordination and premium/discount control, active ETFs face differentiated requirements. Portfolios must be adjusted continuously according to investment strategy, yet creation and redemption lists require rebalancing plans to be set one day in advance. If a product maintains a persistently high equity position, cash and subscription-redemption position management becomes significantly harder. Fund companies must build supporting business systems, making overall operational complexity higher than for traditional passive ETFs.

Differences also appear in creation and redemption list preparation and validation. The net asset value reference verification process for active ETFs is more complex. Because holdings change dynamically, systems must promptly verify asset prices, fund shares and subscription-redemption consideration, with corresponding verification and exception-handling checkpoints in place.

Active ETFs' risk management objectives differ from those of passive ETFs.

China's ETF market has reached nearly RMB 5 trillion in scale. Active ETFs disclose holdings daily and investment behavior is constrained by performance benchmarks, which helps improve investment discipline and direct capital toward quality assets. With investment research and strategy innovation as core competitiveness, active ETFs are pushing the industry from scale expansion toward capability deepening.