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Mirae Asset Horizons S&P Crude Oil Futures Enhanced ER ETF (Stock Code: 3097)

Important information about Mirae Asset Horizons S&P Crude Oil ETF

The Mirae Asset Horizons S&P Crude Oil Futures Enhanced ER ETF (“Sub-Fund”) is a futures based ETF. The risks of investing in the Sub-Fund are therefore greater than those of investing in other types of ETF. In particular investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks. Here are the risks which investors may face:

Commodity Markets Specific Risks

Several factors may affect the price of commodities such as WTI crude oil and, in turn, WTI Futures Contracts owned by the Sub-Fund, including, but not limited to:

  • Significant increases or decreases in the available supply of a physical commodity due to natural or technological factors.
  • Significant increases or decreases in the demand for a physical commodity due to natural or technological factors.
  • A significant change in the attitude of speculators and investors towards a physical commodity.
  • Large purchases or sales of physical commodities by the official sector.
  • Other political factors such as imposition of regulations or entry into trade treaties, as well as political disruptions caused by
  • societal breakdown, insurrection and/or war may greatly influence commodities prices;
  • A significant increase or decrease in commodity hedging activity by commodity producers.
  • The recent proliferation of commodity-linked, exchange traded products and their unknown effect on the commodity markets.

Crude Oil Commodity Volatility Risk

An exchange traded fund such as the Sub-Fund which has exposure to the commodities markets such as WTI crude oil may be subject to greater volatility than traditional securities. The value of crude oil may be affected by changes in overall market movements, changes in interest rates, or sectors affecting a particular commodity, such as war, embargoes, tariffs and international economic, political and regulatory developments. Investors may suffer substantial / total loss by investing in the Sub-Fund.

Spot vs. Futures Risk

The Sub-Fund tracks the Index which is based upon the price movement of the WTI Futures Contracts (i.e. contracts for delivery of WTI crude oil at some point in the future as specified in the specific contract). The Sub-Fund does not invest in the physical crude oil.

The risk of investing in a WTI Futures Contract is that it can be speculative in nature.

The Sub-Fund does not invest in the physical WTI crude oil market, and the Sub-Fund is exposed to the potential risks involved of using WTI Futures Contracts which are speculative in nature.

Concentration/single commodity risk

The Sub-Fund will primarily invest in WTI Futures Contracts. The number of commodities represented by such WTI Futures Contracts is only one (i.e. only crude oil). Concentration in a single underlying commodity may result in a greater degree of volatility in a WTI Futures Contract and as a result, the Index as well as the Net Asset Value of the Sub-Fund under specific market conditions and over time. As the exposure of the Sub-Fund is concentrated in the WTI crude oil market, it is more susceptible to the effects of oil price volatility than more diversified funds.

Regulatory Change Risk

The regulation of Futures Contracts, and futures transactions in general, is a rapidly changing area of law and is subject to modification by government and judicial action. The effect of any such regulatory changes on the Sub-Fund is impossible to predict, but could be substantial and adverse.

Crude Oil Price Risk

The prices of WTI crude oil are primarily affected by the global demand for and supply of crude oil, but are also influenced significantly from time to time by speculative actions and by currency exchange rates. Crude oil prices are generally more volatile and subject to dislocation than prices of other commodities.

Rolling of Futures Contracts Risk

The Index is calculated with reference to WTI Futures Contracts exposing the Sub-Fund to a liquidity risk linked to WTI Futures Contracts which may affect the value of such WTI Futures Contracts.

Contango and Backwardation Risk

The Index is composed of WTI Futures Contracts. Every month, certain WTI Futures Contracts included in the Index may be replaced by contracts with different expiration dates.

Contango or backwardation could last for an undetermined period of time. WTI crude oil has at times in the past traded in contango due to material storage costs of oil, as well as high demand of crude oil. Because roll yields are considered in the calculation of the Index, the presence of contango in the commodity markets could result in negative "roll yields," which could adversely affect the level of the Index, the Net Asset Value and reduce the value of the Unitholders’ investment.

Margin Risk

Generally, most leveraged transactions, such as WTI Futures Contracts, involve the posting of margin or collateral. Because of the low margin deposits or collateral normally required in futures trading, an extremely high degree of leverage is typical of a futures trading account. As a result, a relatively small price movement in a WTI Futures Contract may result in a proportionally high impact and substantial losses to the Sub-Fund having a material adverse effect on the Net Asset Value of the Sub-Fund.

Futures Contracts Market Risks

Futures Contracts markets for WTI crude oil may be uncorrelated to traditional markets (such as equities markets) and may be subject to greater risks than traditional markets. It is a feature of Futures Contracts generally that they are subject to rapid change and the risks involved may change relatively quickly. The price of Futures Contracts can be highly volatile and may deviate substantially from the day-end WTI crude oil spot price. Such price movements are influenced by, among other things, interest rates, changing market supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments.

Credit/counterparty Risk

Investment in fixed income securities is subject to the credit risk of the security or its issuers, who may be unable or unwilling to make timely payments of principal and/or interest. In the event of a default or credit rating downgrading of the securities or the issuers of the fixed income securities held by the Sub-Fund, the Sub-Fund’s value will be adversely affected and investors may suffer a substantial loss as a result.

Interest Rate Risk

Investment in the Sub-Fund is subject to interest rate risk. In general, the prices of debt securities rise when interest rates fall, whilst their prices fall when interest rates rise.

Credit Ratings Risks

Credit ratings assigned by rating agencies are subject to limitations and do not guarantee the creditworthiness of the security and/or issuer at all times.

New Product Risk

The Sub-Fund is a futures based exchange traded fund investing directly in WTI Futures Contracts. Although there have been commodities exchange traded funds, futures and options mutual funds and units trusts and futures-based exchange traded funds in Hong Kong, the Sub-Fund will be one of the first futures based exchange traded funds tracking a single commodity futures index such as the Index in Hong Kong. The novelty and untested nature of such an exchange traded fund makes the Sub-Fund riskier than traditional exchange traded funds investing in equity Securities.

Excess Return Index Risk

The Index is an excess return index (“Excess Return” does not mean any additional return on the ETF’s performance), which means the Index measures the returns accrued from investing in uncollateralised WTI Futures Contracts (i.e. the sum of the price return and the roll return associated with an investment in WTI Futures Contracts). By contrast, total return indices, in addition to reflecting those returns, also reflect interest that could be earned on funds committed to the trading of the Futures Contracts included in such indices (i.e. the collateral return associated with an investment in Futures Contracts). Investing in the Sub-Fund will therefore not generate the same return as would be generated from investing directly in the relevant WTI Futures Contracts or in total return indices related to such WTI Futures Contracts.

Distributions May Not be Paid Risk

The Index is an excess return index. Distributions may not be paid if the cost of the Sub-Fund’s operations is higher than the yield from management of the Sub-Fund’s cash and holding of investments. There is no current intention to make distribution out of capital or effectively out of capital.

Tracking Error Risk

The Net Asset Value of a Sub-Fund may not correlate exactly with its Index. Factors such as the fees and expenses of a Sub-Fund, imperfect correlation between a Sub-Fund’s assets and the Securities or Futures Contracts constituting its Index, inability to rebalance a Sub-Fund’s holdings of Securities or Futures Contracts in response to changes in the constituents of the Index, rounding of Security or Futures Contracts prices, changes to the Indices and regulatory policies may affect the Manager’s ability to achieve close correlation with the relevant Index.

Concentration Risk

A Sub-Fund may be subject to concentration risk as a result of tracking the performance of a single geographical region. Such a Sub-Fund is likely to be more volatile than a broad-based fund, such as a global or regional equity fund, as it is more susceptible to fluctuations in value resulting from adverse conditions in the relevant region.

Trading Risk

While the creation/redemption feature of the Sub-Fund is designed to make it likely that Units will trade close to their Net Asset Value, disruptions to creations and redemptions.

Reliance on the Manager Risk

Unitholders must rely on the Manager in formulating the investment strategies and the performance of each Sub-Fund is largely dependent on the services and skills of its officers and employees. In the case of loss of service of the Manager or any of its key personnel, as well as any significant interruption of the Manager's business operations or in the extreme case of the insolvency of the Manager, the Trustee may not find successor managers with the requisite skills, qualifications and the new appointment may not be on equivalent terms or of similar quality.

 

All dollar amounts are in HKD and all dates are in GMT+8 Time, unless otherwise specified.

Fund objective and investment strategy

The Sub-Fund seeks to provide investment results that, before deduction of fees and expenses, closely correspond to the performance of the S&P GSCI Crude Oil Enhanced Index Excess Return (“Underlying Index”)(“Excess Return” does not mean any additional return on the ETF’s performance).

In seeking to achieve the Sub-Fund’s investment objective, the Manager will adopt a full replication strategy through investing directly in WTI Futures Contracts so as to give the SubFund the performance of the Underlying Index. In entering the WTI Futures Contracts each calendar month, the Manager anticipates that not more than 20% of the Net Asset Value from time to time will be used as margin to acquire the WTI Futures Contracts.

In entering the WTI Futures Contracts each calendar month, the Manager anticipates that not more than 20% of the Net Asset Value from time to time will be used as margin to acquire the WTI Futures Contracts. Not less than 80% of the Net Asset Value of the Sub-Fund will be invested in cash (HKD), cash equivalents and HKD or USD denominated short term investment grade government bonds (rated by Standard & Poor’s, Moody’s or Fitch). It is anticipated that the investment in bonds will not exceed 50% of the Net Asset Value of the Sub-Fund.

Any yield from these investments will be used to meet the Sub-Fund’s fees and expenses and after deduction of such fees and expenses the remainder may be distributed by the Manager to Unitholders in HKD at the discretion of the Manager.

Other than WTI Futures Contracts, the Manager has no intention to invest the Sub-Fund in any financial derivative instruments (including structured products or instruments) for hedging or non-hedging (i.e. investment) purposes, or engage the Sub-Fund in securities lending, repurchase transactions or other similar over-the-counter transactions.

The Sub-Fund will not itself use leverage and the Sub-Fund’s global exposure to financial derivative instruments (based on the settlement price of the WTI Futures Contracts) will not exceed 100% of its Net Asset Value.

 

Estimated NAV per Unit [1]

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Daily NAV per Unit [3] {{navasofdate | madate:plocale }}

NAV
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Change ($)
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Change (%)
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Fund information {{ navasofdate | madate:plocale}}

Fund Inception Date
10 Jun 2016
Listing date on the HKEx
16 Jun 2016
Financial year end of the Fund
Ending 31 Mar each year
Ongoing charges over a year
0.98% per annum of NAV [7]
Management Fee
0.75% per annum of the NAV [9]
Distribution Frequency
Annually at the Manager's discretion (March in each year)
Equity Exposure
Futures-Based

Index information [4] {{ asofdate }}

Underlying Index
S&P GSCI Crude Oil Enhanced Index Excess Return
Index Provider
Standard & Poor’s
Type of Index
Excess Return.
Base currency
USD
Closing Level
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Change
{{ pricechange }}
Change %
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Trading information

Exchange
Hong Kong Stock Exchange
Stock Code
3097
ISIN
HK0000296944
Board Lot Size
500 Units
Trading Currency
HKD
Total NAV
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Outstanding Units
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Appropriation

Leverage
No
Actively Managed
No
Swap Base
No
Derivatives Base
Yes
Securities Lending
No

Daily Holdings {{ holdasofdate | madate:plocale }}

Total Net Asset Value (HKD)
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Total Value of Futures Contract (HKD) ($)
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Futures Contract Exposure [8] (%)
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View all holdings

Participating dealers [5]

  • ABN AMRO Clearing Hong Kong Limited
  • CIMB Securities Limited
  • Commerzbank AG
  • Guotai Junan Securities (Hong Kong) Limited
  • Goldman Sachs (Asia) Securities Limited
  • Mirae Asset Securities (HK) Limited
  • KGI Securities (Hong Kong) Limited

Market makers [6]

  • Commerz Securities Hong Kong Limited
  • Bluefin HK Limited
  • KGI Securities (Hong Kong) Limited
[1]
Estimated NAV per unit is indicative only and is provided on a 15-second delayed basis by Interactive Data Managed Solutions. (See terms and conditions) and is updated during trading hours of the HKEx.
[2]
Market prices are provided on a 15-minute delayed basis by Interactive Data Managed Solutions. (See terms and conditions)
[3]
Change indicates the change since the previous business day. For more information on calculation of NAV, please refer to the Prospectus.
[4]
Index returns are for illustrative purposes only and should not be taken as an indication or guarantee of future performance. Management fees, transaction costs or other expenses are not reflected in index returns. Change indicates the change since the previous business day's closing index level. (Source: Standard & Poor's).
[5]
Additional Participating Dealer(s) will be appointed from time to time.
[6]
Additional Market Maker(s) will be appointed from time to time.
[7]
The ongoing charges figure is an annualised figure based on expenses reported in the Sub-Fund’s audited financial statements for the year ended 31 March 2017, expressed as a percentage of the Sub-Fund’s average net asset value over the same period. This figure may vary from year to year. It includes the amortised portion of the set-up costs of the Sub-Fund applicable to the relevant period but excludes any extraordinary expenses.
[8]
% of Futures Contract in Total asset.
[9]
Please note that such a fee may be increased up to a permitted maximum amount by providing 1 month’s prior notice to unitholders. Please refer to the “Fees and Expenses” section of the Prospectus for details.

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