London-based Ashmore has joined the ranks of fund houses distributing RQFII funds outside of Hong Kong with the launch of a trio of actively managed China Sicav funds.
The push comes despite suggestions from fund houses in London that demand for dedicated China funds oustide of Greater China will be slim initially given overseas investors' unfamiliarity with investing in the market.
Christoph Hofmann, Ashmore’s global head of distribution based in London, concedes that many international investors still don't have dedicated exposure to China. "Any institutional investor of size will always have some dedicated exposure to the US, but not necessarily China," he said.
"With China being the second largest economy in the world, we anticipate that over time most institutions and retail investors will have to have some dedicated exposure to China. We now offer them products to do that."
The first of the three funds invests in China debt securities issued by sovereigns, quasi sovereigns and public and private sector companies denominated in RMB. The equity fund invests in Chinese A-shares listed in Shanghai and Shenzhen, although it is not be geared to any sectors. The third product follows a balanced strategy of equities and bonds.
The management fee for the debt fund is 115 basis points (bp), while the fee for the multi-strategy and equity funds will be 150bp.
The three renminbi-denominated qualified foreign institutional investor (RQFII) funds complement the firm's two other China-dedicated funds – the Greater China fixed income fund and Greater China equity fund – for which the manager uses existing QFII quota.
Ashmore became the first manager outside of Greater China to be granted RQFII status by the China Securities Regulatory Commission (CSRC) this January.
London-headquartered HSBC has suggested it will launch an exchange-traded product tracking one of the mainland’s benchmarks, as reported. HSBC and BlackRock were granted RQFII licences for their London operations in July.
French firm Lyxor Asset Management told AsianInvestor earlier this year of its plans to launch a phyisically backed RQFII ETF on the London Stock Exchange, as reported.
In response to AsianInvestor queries, Pierre Gil, chief executive of Lyxor's UK business, confirmed that the product had been approved by authorities in Beijing and Paris and was set for launch at the start of this month, potentially on September 9.
To date three RQFII ETFs have been listed on the LSE. The first arrived in January with CSOP and Source launching the FTSE China A50 UCITS ETF. This was quickly followed by Deutsche Asset & Wealth Management and Harvest, which launched an ETF tracking the mainland’s CSI300 index.
More recently in May, E Fund partnered ETF Securities to launch a fund tracking the MSCI China index.
In July, China and Greater China funds saw net inflows in the UK of £4 million ($6.58 million), taking total AUM to £1.66 billion. This compares with the £482 billion AUM of equity funds in the UK, according to the Investment Management Association.