| Details | Cross References |
| Issue date: 4 December 2023 Effective date: 15 December 2023 | Chapter 4 Rule 703 Appendix 7.1 |
- 1. Introduction
- 1.1This Practice Note provides guidance on the Exchange’s requirements for the listing of actively managed exchange traded funds ("Active ETFs"). An Active ETF is an ETF in which the investment manager makes investment decisions on the portfolio of the ETF without being subject to the set rules of an index.
- 1.2Active ETFs must comply with the listing rules applicable to investment funds.
- 2.Listing Requirements for Active ETFs
- Disclosure
- 2.1An Active ETF shall ensure that it prominently discloses in the prospectus or offering document that the ETF will be actively managed. Such disclosure shall also be made in the marketing materials of the Active ETF.
- Investment style
- 2.2As best practice, an Active ETF should adopt the applicable disclosures and practices set out in MAS Circular No. CMI 32/2020 Good Disclosure Practices for Actively Managed Funds.
- 2.3Notwithstanding paragraph 2.2, an Active ETF shall disclose:
- (a)that it will be an actively managed ETF;
- (b)its investment style, in a manner that would be plainly understood by retail investors;
- (c)its investment limits and constraints and how such limits and constraints may affect the risks and expected returns of the Active ETF; and
- (d)the following, where it is not managed in reference to any benchmark:
- (i)a clear statement that the Active ETF is not managed in reference to any benchmark, with an accompanying explanation of why a reference benchmark is not used; and
- (ii)the associated risks of not being managed in reference to any benchmark.
- 2.4An Active ETF shall also have in place processes to ensure that:
- (a)its directors or senior management, as the case may be, have effective oversight of the Active ETF’s operations; and
- (b)the Active ETF’s promotional materials are clear, fair, balanced, non-misleading and fully comply with relevant rules and regulations.
- Investment manager
- 2.5Rule 404(5) states that the management company (if there is no management company, the sponsor or trustee) must be reputable and have an established track record in managing investments. Generally, the management company (sponsor or trustee) must have been in operation for at least five years.
- 2.6For an Active ETF, the management company must have an established track record in managing other actively managed funds to satisfy Rule 404(5).
- 2.7Rule 404(6) states that the persons responsible for managing the investments of the investment fund must be reputable and have a track record in managing investments for at least 5 years. They must have satisfactory experience in managing the particular types of funds for which listing is sought.
- 2.8For an Active ETF, the persons responsible for managing the investments must have satisfactory experience in managing actively managed funds.
- 3.Continuing Listing Obligations
- Net asset value ("NAV") disclosure
- 3.1Rule 748(1) states that an investment fund must announce via SGXNET its net tangible assets per share or per unit at the end of each week.
- 3.2An Active ETF will be in compliance with Rule 748(1) if it:
- (a)publishes its daily NAV per share or per unit on its website, on the business day following each trading day before the market opens; and
- (b)announces, via SGXNET, its NAV per share or per unit at the end of each week.
- Indicative Net Asset Value ("iNAV") Disclosure
- 3.3An Active ETF shall publish, on its website, the iNAV per share or per unit at least every 15 seconds during trading hours on the Exchange.
- 3.4An Active ETF shall ensure that, as far as practicable, the iNAV provides an accurate indication of the Active ETF’s NAV. In appropriate cases, an Active ETF may use suitable proxies for the calculation of iNAV.
- 3.5An Active ETF shall disclose in its prospectus or offering document:
- (a)the iNAV calculation methodology, including any use of proxies to determine iNAV;
- (b)the relevant risks and limitations of iNAV; and
- (c)a statement that the iNAV is not independently verified by the Exchange.
- Disclosure of portfolio holdings
- 3.6An Active ETF shall publish, at least once a month, its full portfolio holdings on SGXNET and on its website. The report must reflect the full portfolio holdings of the Active ETF with no more than a one month lag.
- 3.7For example, where an Active ETF publishes its full portfolio holdings on 15 November, the published portfolio holdings shall reflect the Active ETF’s actual holdings as at a date no earlier than 16 October.
- 3.8An Active ETF must comply with Rule 703 on the disclosure of material information. Rule 703 states that an issuer must observe the Corporate Disclosure Policy set out in Appendix 7.1. Under Appendix 7.1, the Exchange recognises that there may be limited instances where selective disclosure is necessary. Disclosure may be made to Participating Dealers of the Active ETF to facilitate creation and redemption. Disclosure for market making purposes may only be made to the Designated Market Makers of the Active ETF. These disclosures must be made on a ‘need to know’ basis and subject to appropriate confidentiality restraints. Such arrangements must also be in compliance with insider trading regulations.
- 3.9An Active ETF must have effective controls and segregation of duties to address any conflict of interest that may arise from these arrangements with the Participating Dealers of the Active ETF or the Designated Market Makers of the ETF to ensure that the Active ETF will, at all times, act in the best interest of its unitholders.
- Tracking performance
- 3.10An Active ETF shall publish, no less frequent than on a monthly basis, its performance and where applicable, the performance of its reference benchmark, covering the following periods of time: 3-month, 6-month, 1-year, 3-year, 5-year, 10-year and since inception.
Added on 4 December 2023.