Hong Kong Bitcoin ETF Battle of the Three Giants: Asset Management Titans' Strategic Showdown

Hong Kong officially opened a new chapter for the Bitcoin ETF market in April 2024. With the joint support of the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority, three major asset management firms—Huaxia Fund, Harvest Fund, and Bosera Fund—successfully received approval to launch spot ETF products for Bitcoin and Ethereum, marking a new milestone for crypto asset investment tools in Asia. The debut of these Bitcoin ETFs in Hong Kong not only provides global investors with new investment channels but also demonstrates Hong Kong’s innovative capabilities as an international financial center.

How Spot ETFs Are Changing Hong Kong’s Investment Landscape

Bitcoin and Ethereum spot ETFs are exchange-traded funds that feature high liquidity and flexible trading mechanisms. Unlike traditional methods of purchasing actual cryptocurrencies, these ETFs track Bitcoin prices by holding large amounts of spot crypto assets. Their operational logic is similar to gold spot ETFs but is designed specifically for virtual assets.

For investors, the launch of these Bitcoin ETF products in Hong Kong offers multiple advantages. First, spot crypto ETFs significantly simplify the investment process, lowering entry barriers and eliminating the need for investors to manage private keys or worry about asset security. Second, professional fund management ensures regulated investment operations and robust risk control systems. Third, investors can easily trade on major securities platforms, reducing operational complexity and potential risks.

It is noteworthy that these ETF products support physical creation and redemption mechanisms, allowing investors to indirectly hold Bitcoin through ETF shares, enjoying appreciation of the spot assets while avoiding the risks of direct ownership. Additionally, whether subscribing with cash or Bitcoin, operations only require opening the corresponding accounts in Hong Kong. According to a joint notice from Hong Kong regulators in December 2023, while retail investors in regions with restrictions on virtual asset sales such as Mainland China are not permitted to participate, Mainland residents holding Hong Kong IDs can still engage in trading under compliance.

Differentiated Strategies of the Three Funds

On April 30, 2024, the Bitcoin and Ethereum ETFs from the three firms were officially listed in Hong Kong, but they show clear differences in issuance details and operational strategies.

Pricing and Trading Thresholds

For the initial offering price, Huaxia Fund and Harvest Fund both opened at $1 USD, while Bosera Fund priced based on 0.0001 times the CME CF Bitcoin Index as of 4 p.m. Hong Kong time on April 26. Regarding the number of shares per transaction, Huaxia Fund and Harvest Fund set a minimum of 100 shares, whereas Bosera Fund lowered it to 10 shares, clearly aiming to attract small and medium investors. For subscription minimums, Huaxia Fund and Bosera Fund require a minimum of 10,000 shares, while Harvest Fund raises this to 50,000 shares, reflecting their different market positioning.

Fee Structures and Currency Support

In terms of management fees, the three firms adopt differentiated strategies. Huaxia Fund charges an annual fee of 0.99%; Harvest Fund offers six months of free management, then 0.3%; Bosera Fund provides four months free, followed by 0.6%. From a competitive perspective, Harvest Fund has the lowest long-term fee rate, but Bosera Fund uses free periods during the initial phase to attract early investors.

Regarding currency support, Huaxia Fund offers trading options in USD, HKD, and RMB, whereas Harvest Fund and Bosera Fund only support USD and HKD, which somewhat limits participation options for certain investors.

Custody and Regulatory Frameworks

All three firms entrust Bank of China International (BOCI) International Trust as the primary custodian. For sub-custodians, Huaxia Fund and Harvest Fund chose OSL Digital Securities Limited, while Bosera Fund selected Hash Blockchain, reflecting different preferences for asset custody and risk management.

In terms of auditing, Huaxia Fund and Harvest Fund appointed PwC as auditors, while Bosera Fund chose Ernst & Young. Independent audits ensure the accuracy and compliance of ETF financial reports, providing confidence to investors.

Trading Ecosystem and Liquidity Support

Trading Platforms and Market Makers

The listing of Bitcoin ETFs in Hong Kong requires a robust trading ecosystem. Huaxia Fund and Harvest Fund trade on OSL Exchange, while Bosera Fund selected HashKey Exchange. This diversification of platforms helps spread risk and enhance liquidity.

Regarding market makers, Huaxia Fund has engaged Vivienne Court Trading; Harvest Fund has assembled three professional market makers: China Merchants Securities (Hong Kong), CICC Lyon Securities, and Virtu Financial Singapore. Bosera Fund’s market maker lineup has not been fully disclosed yet. The number and quality of market makers directly impact ETF price stability and trading costs.

Network Effects of Participating Securities Firms

Authorized Participants (APs), large financial institutions responsible for ETF creation and redemption, play a crucial role. Huaxia Fund and Harvest Fund have engaged institutions including Victory Securities, Future Asset Securities (Hong Kong), Huaying Oriental (Asia) Holdings, E-Trade Securities, and Huasheng Capital Securities. Harvest Fund additionally includes China Merchants Securities (Hong Kong). A sufficient number of APs enhances the convenience of ETF creation and redemption, ensuring that market prices stay close to net asset value (NAV).

Asset Management Scale and Market Competition

According to Bloomberg Intelligence, the three funds differ significantly in overall strength. Huaxia Fund has an asset management scale of $55.7 billion in Mainland China, with 84 ETFs issued; in Hong Kong, it manages $3.6 billion across 15 ETFs, leading the market. Harvest Fund has $10.3 billion in Mainland assets with 42 ETFs, and $16 million in Hong Kong with 4 ETFs, representing a smaller market share. Bosera Fund manages $10.7 billion in Mainland assets with 43 ETFs, and $40 million in Hong Kong with 6 ETFs, positioned between the two.

These figures reveal an interesting phenomenon: Huaxia Fund, the largest in Mainland China, has established a mature product ecosystem in Hong Kong, while Harvest and Bosera leverage Bitcoin ETFs as entry points to develop the Hong Kong market.

How Investors Should Choose

Different investor needs mean each of the three funds has its advantages. For those seeking low fees and ample capital, Harvest’s 0.3% annual fee is attractive; short-term investors favoring fee discounts may consider Bosera Fund; investors looking for multi-currency trading convenience should opt for Huaxia Fund. Additionally, investors should pay attention to the custody institutions, market maker lineup, and network of participating securities firms, as these factors directly influence trading liquidity and risk management.

As virtual assets gain prominence in the global financial system, the launch of Bitcoin ETFs in Hong Kong not only provides local investors with compliant and transparent investment tools but also demonstrates Hong Kong’s leadership in financial innovation. For global investors interested in crypto asset investments, these three ETF products in Hong Kong are undoubtedly worth exploring in depth.