Before 2020, short-duration U.S. Treasury ETFs were a relatively niche category. SPDR's 1-3 Month T-Bill ETF (BIL) from State Street Global Advisors typically saw assets under management (AUM) hovering around $20-30 billion, while BlackRock's iShares 0-1 Year Treasury Bond ETF (SHV) had just over $10 billion. These products carried management fees of only a dozen basis points, offered negligible yields, and their daily net asset value fluctuations were barely perceptible. In an era dominated by equity investments, they were akin to the plumbing in a mutual fund's infrastructure—essential but rarely discussed. Subsequent developments are well-known. As the U.S. dollar entered a rate-hiking cycle and risk-free rates soared, institutional investors suddenly recognized short-duration Treasury ETFs as excellent cash management tools—offering good liquidity, T+0 trading, pledgeability, and yields that automatically adjusted upward with rising rates. BIL's AUM surged from just over $20 billion to $46 billion, while SHV grew to over $20 billion. Short-duration bond ETFs transformed from mere plumbing into reservoirs, with pension funds, insurance companies, and corporate treasuries lining up to pour money in. Interestingly, a structurally similar but path-different story is unfolding in the Chinese market, particularly under opposite interest rate conditions. The yield on 10-year Chinese government bonds has been trending lower, and money market fund annualized yields have fallen below 1%. Yet, the destination is converging: Institutional funds are flooding into on-exchange short-duration bond ETFs for cash management and liquidity allocation. During the week of May 11-17, 2026, bond ETFs became the most actively traded category among ETFs, accounting for over 43% of total weekly ETF turnover. The single product with the highest average daily turnover was a China Securities Short-term Financing Bill ETF managed by a mid-sized public fund manager, sustaining daily turnover in the hundreds of billions of RMB. This manager is HFT Investment Management Co., Ltd. (HFT). Its six bond ETFs collectively hold RMB 173.3 billion in AUM, representing nearly 70% of the company's non-money market fund scale. Another significant development is that HFT currently stands at the crossroads of a merger with Hua An Fund Management Co., Ltd.
1. The Trillion-Yuan Journey On August 3, 2020, the HFT China Securities Short-term Financing Bill ETF (hereinafter referred to as the "Short-term Financing ETF") listed on the Shanghai Stock Exchange. With management and custody fees of 0.15% and 0.05% respectively, it attracted 1,130 holders on its inception day, almost entirely institutional capital, drawing little market attention. That year, the public fund industry's spotlight was on core assets and thematic investments. Fund managers like Zhang Kun and Ge Lan were becoming household names, and the scale race for active equity funds was intense. A short-term financing bill index fund with a yield below 2% and daily NAV volatility of just 0.01% was, in the market context of the time, akin to a blank sheet of paper. It took four years to fill that sheet. In 2024, the Short-term Financing ETF entered an explosive growth phase, with its AUM swelling from less than RMB 20 billion to RMB 60 billion. Growth continued in 2025, reaching RMB 70.2 billion. In Q1 2026, its scale jumped directly to RMB 90.9 billion, briefly touching a high of RMB 94 billion in April before slightly retreating to around RMB 91 billion. The journey from obscurity to nearing the RMB 100 billion mark took less than six years. HFT's strategic moves extended beyond the Short-term Financing ETF. The firm developed a comprehensive bond ETF matrix: a City Investment Bond ETF at RMB 50.4 billion, a Benchmark Market-Making Corporate Bond ETF launched in early 2025 that has already reached RMB 10.1 billion, a Convertible Bond ETF at RMB 10.7 billion, a 10-year Local Government Bond ETF at RMB 7.3 billion, and a 5-year Local Government Bond ETF with over RMB 1 billion. In the Shanghai Stock Exchange's 2026 ETF industry report, HFT was listed among the six institutions jointly researching bond ETFs, alongside China Asset Management, E Fund Management, and Huatai-PineBridge Fund Management. HFT, a mid-sized company ranked 25th in the industry by non-money market fund AUM, secured a seat at this table based on a single product category. HFT's six bond ETFs collectively amount to RMB 173.3 billion, constituting 68% of its total non-money market AUM of RMB 254.6 billion. For the full year 2025, HFT reported revenue of RMB 1.333 billion and net profit of RMB 485 million. Founded in 2003 as a Sino-foreign joint venture fund manager, HFT has, after over two decades of development, effectively transformed into a bond ETF company. In a sense, its fate is now deeply intertwined with this product line. It is important to note that HFT is the only issuer of an ETF tracking the China Securities Short-term Financing Bill Index, with no effective competing products currently. With nearly RMB 100 billion in AUM and RMB 45 billion in average daily turnover, its liquidity depth could become an insurmountable moat for potential entrants. This moat once faced an attempted challenge. On May 16, 2022, the Short-term Financing ETF's AUM first surpassed RMB 10 billion. Almost simultaneously, Southern Asset Management, GF Fund Management, and Harvest Fund Management applied in succession to launch similar Short-term Financing ETFs. However, four years later, none of the three applications proceeded to launch. Whether the managers voluntarily withdrew after internal assessment, were diverted by negotiable certificate of deposit (NCD) products, or were not approved due to considerations of avoiding homogeneous competition—especially increased caution towards innovations in on-exchange high-liquidity fixed-income tools following the bond market turmoil in late 2022—remains unknown to the public. But the outcome is the same: over the four years from RMB 10 billion to approaching RMB 100 billion, HFT's Short-term Financing ETF established a monopoly, with its liquidity barrier continuously self-reinforcing in a competitor-free environment.
2. Undercurrents of Capital Unlike some bond ETFs that use in-kind creation/redemption, the Short-term Financing ETF employs a cash creation/redemption model. The balance between its primary and secondary markets relies more on the fund manager's cash substitution handling, market maker inventory management, and on-exchange trading depth, rather than simple in-kind swaps of a basket of bonds. Examining changes in the holder structure reveals an intriguing curve. At the product's inception, institutional investors accounted for 99.72% of holdings. For a newly launched, niche bond ETF, it was naturally institutions that first tested the waters. Over the next four years, the proportion of individual investors steadily increased: reaching 22% by the 2022 annual report and peaking at 43% in the 2024 annual report. The number of holder accounts grew 15-fold from 1,130 to 17,950. A tool designed for institutional cash management nearly became a "semi-retail" product. This trend was logical. Around 2024, money market fund yields plummeted. Tianhong Yu'e Bao's 7-day annualized yield lingered below 1% for extended periods, meaning RMB 10,000 invested earned just over RMB 0.20 per day. In contrast, the Short-term Financing ETF offered an annualized yield roughly between 1.6% and 1.8%, nearly double that of money market funds, while supporting T+0 on-exchange trading and having lower fees than most short-term bond funds. For individual investors with securities accounts, it was an almost irresistible choice. However, by 2025, the trend shifted again. Institutional capital returned in force, with its share rebounding from 56.88% to 68.88% by year-end 2025. The number of holder accounts further surged to 37,382. Individual investors did not leave; their absolute share count actually grew from 114 million to 194 million. It was simply that institutional inflows were more aggressive. Behind the institutional return, three forces may have converged. The first stems from delegated allocations from bank wealth management products. By the end of Q1 2026, bank wealth management's allocation to public funds reached RMB 1.95 trillion, accounting for 5.7% of total wealth management AUM—a record high. Approximately 70% of this was directed towards bond funds. In April 2026, bank wealth management AUM increased by RMB 2.6 trillion in a single month, exceeding the average for the same period from 2021 to 2025. Wealth management subsidiaries require high-liquidity, low-volatility, T+0 cash management tools. The Short-term Financing ETF precisely fits this need. Moreover, it can be used for pledge repo, effectively allowing institutions to obtain financing while holding the asset. The second force comes from the self-reinforcing ecosystem of securities firm market making. The Short-term Financing ETF's market maker roster continued to expand in H1 2026, with Industrial Securities and China Securities joining, bringing the total to over 12. More market makers mean narrower bid-ask spreads and deeper order book liquidity, which in turn attracts more institutional capital—a positive feedback loop. The Short-term Financing ETF is also eligible for margin trading, allowing securities firm proprietary desks to use it for underlying position management. The third force arises from efficiency optimization within insurance and pension systems. HFT itself is an investment manager for the National Social Security Fund, the Basic Pension Insurance Fund, and enterprise annuities, giving it natural client accumulation on the institutional side. In a low-interest-rate environment, the fixed-income allocations of insurance and pension funds increasingly rely on on-exchange standardized tools to reduce friction costs. It is noteworthy that the micro-level expansion of the Short-term Financing ETF has not come at the expense of an overall contraction in money market funds. By the end of Q1 2026, total money market fund AUM grew from RMB 15.01 trillion at the start of the year to RMB 15.58 trillion, continuing its robust expansion. The Short-term Financing ETF is carving out an incremental, parallel channel for funds alongside money market funds. Approximately 70% of institutional capital provides the foundational AUM scale, while 30% from retail investors contributes to trading activity and liquidity depth. Both types of capital flow to the same product for their respective reasons. There is another easily overlooked detail. Unlike some ETFs that use in-kind creation/redemption, the Short-term Financing ETF uses a cash creation/redemption mechanism. Investors deliver cash, not a basket of short-term financing bonds, for creations and redemptions. The fund manager itself is responsible for the underlying bond transactions, portfolio rebalancing, liquidity management, and duration control. This means HFT is, to some extent, acting as a "liquidity transformer": bridging the less continuous, fragmented credit bond market on one side and the on-exchange, real-time trading, near-cash-management-experience ETF shares on the other. As scale expands, market making deepens, and bid-ask spreads narrow, the Short-term Financing ETF increasingly resembles an on-exchange cash substitute. This self-reinforcing liquidity precisely constitutes a barrier difficult for latecomers to replicate.
3. Deep Waters Form a Pool Zooming out from HFT reveals a larger industry curve. The first bond ETF in mainland China was established in 2013. From then until May 2024, it took 11 years for the total AUM of bond ETFs to surpass the first RMB 100 billion. The subsequent acceleration is remarkable: the second RMB 100 billion took 7 months, the third took 4 months, and the fourth took just 1 month. By the end of 2025, the total AUM of bond ETFs across the market reached RMB 829.2 billion. It temporarily retreated to RMB 760.1 billion in Q1 2026 due to quarter-end deposit repatriation effects but rebounded to RMB 797.5 billion by May. The proportion of bond ETFs within the total ETF market increased from less than 10% two years ago to 16%, approaching the global average of around 18%. Three underlying drivers are behind this steepening curve. First, the interest rate environment. The persistently declining yield on 10-year Chinese government bonds has compressed the space for active management to generate alpha in the bond market, making the cost advantages of passive indexing more apparent. Second, policy推力. Exchanges implemented a fast-track registration mechanism for bond ETFs, and the market maker system has been continuously improved. In 2025, two batches totaling 21 Science and Technology Innovation Bond ETFs were listed, and the Benchmark Market-Making Corporate Bond ETF was launched around the same time, leading to a supply-side explosion. Third, structural migration on the demand side. Long-term capital from bank wealth management, insurance, and pension funds is rapidly increasing its acceptance of on-exchange fixed-income tools. The competitive logic for bond ETFs differs fundamentally from that of stock ETFs. Stock ETFs compete on indices. For the same CSI 300 Index, firms like Huatai-PineBridge, ChinaAMC, and E Fund engage in close combat, where scale gaps can be narrowed through fee concessions, market maker resources, and channel investments. But bond ETFs compete on liquidity. The Short-term Financing ETF's daily turnover of hundreds of billions of RMB itself constitutes a wider moat. When institutional investors choose on-exchange bond tools, their primary consideration is whether they can execute sufficient volume at a reasonable price when needed. Liquidity begets liquidity; scale begets scale. Once a first-mover establishes an advantage, it becomes almost impossible for later entrants to catch up. Especially for products like the Short-term Financing ETF, the barrier is not just turnover. Its underlying assets consist largely of short-duration credit bonds with discontinuous liquidity. Many bond issues are not actively traded daily, and their valuation relies more on yield curves and market maker quotes than on continuous transaction prices. The fund manager must not only handle on-exchange trading liquidity but also continuously manage the underlying credit bond portfolio for creations/redemptions, cash position management, portfolio duration control, and market maker ecosystem maintenance. To some extent, competition for the Short-term Financing ETF is no longer just about "who was first," but about "who operates more like a stable liquidity system." Larger scale leads to deeper market making, smaller creation/redemption impacts, and greater willingness for institutional capital to stay, ultimately forming a highly self-reinforcing liquidity network effect. This can easily lead to a natural monopoly more rigid than brand recognition. Of course, such natural monopoly exists only in specific, established product segments. In emerging segments like Science and Technology Innovation Bonds, corporate bonds, and local government bonds, the competitive landscape remains open. Firms like E Fund, Yongying Fund, Penghua Fund, and Southern Asset Management are actively expanding their presence. HFT itself is also strengthening its position; its Benchmark Market-Making Corporate Bond ETF has grown from its launch in early 2025 to RMB 10.15 billion. Competition in bond ETFs is evolving from "who has it" to "who has deeper liquidity."
4. The Depths of the Merger In 2025, Guotai Junan Securities and Haitong Securities merged to form Guotai Haitong Securities, with total assets exceeding RMB 2.1 trillion, making it the industry leader. Post-merger, the new entity simultaneously holds controlling stakes in Hua An Fund and HFT. According to the "one participation, one control, one license" regulatory requirement, the two fund managers must be integrated. The plan finalized in March 2026 designates Hua An Fund as the lead entity. This choice seems logical from a size perspective: Hua An's AUM of approximately RMB 750 billion is three times that of HFT. As one of the "Top Ten" public fund managers established in 1998, it possesses more mature brand heritage and investment research systems. The merged entity's AUM will approach RMB 1 trillion, placing it among the industry's top ranks. Market discussions on this merger have largely focused on two points: First, the management licenses HFT holds for the National Social Security Fund, Basic Pension Insurance Fund, and enterprise annuities. These licenses cannot have their names changed arbitrarily. Rumors suggest that post-merger products will be uniformly rebranded under the "HFT" name precisely for this reason. Second, personnel arrangements. Hua An's new Chairman Xu Yong hails from the Changjiang Pension system, while HFT's Chairman Xie Lebin was dispatched by Guotai Haitong Securities specifically to handle merger matters. The RMB 173.3 billion bond ETF portfolio is rarely mentioned as an independent variable in these discussions, yet its impact on the post-merger entity may be no less significant than the increased concentration itself. The narrative of a "Hua An Equity + HFT Fixed Income" dual-engine sounds appealing. Hua An would address its license shortcomings, while HFT would gain broader channel coverage. The bond ETF scale could be further amplified through Hua An's client network. Beneath this ideal scenario, tensions are equally clear. The first tension lies in the profit structure. Estimating based on a 0.15% fee rate, the RMB 173.3 billion bond ETF portfolio contributes approximately RMB 260 million in revenue, accounting for nearly one-fifth of HFT's annual revenue and over half of its profit. In contrast, Hua An's net profit reached RMB 960 million. For the post-merger trillion-yuan entity, management will face resource allocation choices: active equity offers higher profit margins, while bond ETFs, despite their large scale, generate thin profits. For the dual-engine to function, the performance evaluation system must first allocate equal strategic weight to fixed-income ETFs. If the new company adheres to the traditional equity-driven evaluation logic, the probability of this product line being marginalized in resource allocation is not small. The second tension lies in liquidity risk during the transition period. During the three-year transition, products may undergo renaming, system migration, and renegotiation of market maker agreements, among other operations. With 37,000 holders, 12 market makers, and daily turnover of RMB 45 billion, every adjustment in this ecosystem has widespread implications. The barrier of bond ETFs stems from self-reinforcing liquidity. While a smooth brand transition might preserve integrity, any operational disruption, even if brief, during the process could prompt institutional holders to seek alternatives without hesitation. The third tension lies with people. Three portfolio managers—Chen Yiping, Tang Linger, and Tao Feiran—manage the daily operations of the six bond ETFs. Managing bond ETFs does not rely on stock-picking intuition like active equity management; it depends on tracking accuracy, leverage adjustments, primary-secondary market liquidity balancing, and daily coordination with market makers. It is a highly technical, "human + system" coupled operation. The impact of organizational restructuring and personnel arrangements during the merger integration period on the stability of this lean team may become evident. The fourth tension involves the foreign shareholder. BNP Paribas Investment Partners holds a 49% stake in HFT. BNP Paribas Asset Management globally manages approximately €600 billion in AUM (excluding AXA-related parts). Its BNP Paribas Easy series includes over 70 bond ETFs, making it a significant player in the European fixed-income ETF market. Over more than two decades of joint venture history, the extent of substantive capability transfer—in product design experience, risk management frameworks, and international perspective—from this 49% stake remains unknown to the public. The arrangement regarding the foreign shareholder's role in the merger plan will determine whether this implicit link is preserved or severed. Regardless, the fact that the RMB 173.3 billion bond ETF portfolio constitutes 68% of HFT's non-money market fund AUM is both HFT's bargaining chip in the merger and indicative of the greatest cognitive challenge in the integration. Hua An Fund is a veteran public fund manager with deep equity DNA, whose past growth relied on active management, star products, and brand channels. HFT's bond ETF business is a different model—thin profits, large scale, driven by system operation and liquidity flywheels, resembling exchange infrastructure more than a traditional asset management product. When the former leads the merger of the latter, the true test lies at the cognitive level: Can a company accustomed to growth driven by investment research capabilities understand and respect the logic of growth driven by liquidity operations, and allocate commensurate strategic resources for it? The merger plan is set, the three-year transition period has begun. The future of the trillion-yuan Short-term Financing ETF will be written in every resource allocation decision made by the new entity over the next three years.
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