Explainer | How does Hong Kong’s Tracker Fund avoid being caught between US sanctions and doing its job?
- State Street Global Advisors, the manager of the Tracker Fund, did an about turn last week on whether to include US-sanctioned stocks in its portfolio
- There are three ways to change the Tracker Fund’s manager, according to the prospectus
The reversal, matching a similar on-off-on flip-flop by the New York Stock Exchange, underscores how global financial institutions are struggling to keep up with the flurry of executive orders issued in the twilight of Donald Trump’s presidency against Chinese companies.
Millions of retail investors and institutional funds who invest in the Tracker Fund have been affected by the sanction. Here’s how:
What is the Tracker Fund?
Established on November 11, 1999, the Tracker Fund, known simply as TraHK, was set up by the Hong Kong Monetary Authority (HKMA) to dispose of the city government’s equity holdings accumulated in a two-week, HK$118 billion (US$15.2 billion) intervention to prop up stock prices during the 1998 Asian Financial Crisis. At its launch, the portfolio’s value had risen by 69 per cent.
An estimated 184,000 retail investors bought TraHK during its HK$33.3 billion initial public offering, the largest sale in Asia excluding Japan in 1999. Combined with additional sales between 1999 and 2002, the government sold HK$140.4 billion of TraHK to the public, keeping HK$51.3 billion as long-term investments for the Exchange Fund, as the city’s reserve is called.