Barings launching HK-domiciled funds with eye on RMB

Barings will tomorrow launch its first Hong Kong-domiciled funds, targeted at the mass-affluent retail market. The asset manager says having the ability to offer an Rmb hedged class was a key factor in the move.
Barings launching HK-domiciled funds with eye on RMB

Barings will launch its first Hong Kong-domiciled funds tomorrow as it looks ahead to further liberalisation of China’s markets and renminbi internationalisation.

The asset manager already has a range of Ucits funds available in Asia, but is using the Hong Kong domicile to tap into the increasing flow of renminbi from mainland China and around the world.

The funds are expected to be primarily targeted at the mass-affluent retail market as well as QDII investors.

Gerry Ng, Baring Asset Management’s CEO for Asia ex-Japan, will tomorrow launch three Hong Kong domiciled funds – a global multi-asset income fund, a European equity income fund and a Greater China equity fund. In Asia Barings currently has 28 Ucits funds which are domiciled in Ireland; 25 Korea-domiciled funds; and seven Japan-domiciled funds.

Ng told AsianInvestor there were several reasons for the decision to domicile in Hong Kong. “There is a government/ regulatory initiative [in Hong Kong] to encourage more local funds,” Ng said. “For us also the fact is if we launch locally we only have to deal with one regulator. So it made the process easier.”

In addition, Ng said domiciling in Hong Kong gave Barings the greater flexibility to provide an Rmb hedged class, which would provide an outlet for the growing global pools of the Chinese currency.

He said that in Hong Kong Barings was able to provide an Rmb share class where the underlying investment was not necessarily related to the currency. In comparison, a Ucits fund registered locally in Europe cannot have an Rmb share class.

“We see that there is a growing pool of Rmb with offshore centres being set up outside of Hong Kong, and so we expect more people will look for ways of diversifying and putting their money to use without having to switch back to US dollars or Hong Kong dollars.”

In a statement, Barings said the Rmb hedged class would “offer investors an avenue to seize opportunities arising from the much-anticipated mutual recognition platform”.

Ng said that mutual recognition would be an added bonus, but given there was uncertainty over the timing of its launch and the specific rules and regulations, it was not a primary motivation for the move to set up Hong Kong funds.

The three new funds have been authorised by Hong Kong’s Securities and Futures Commission for general distribution, and while they are primarily for the mass affluent in the retail sector, Ng said he expects interest from investors in China looking to invest through institutions which hold quotas in the qualified domestic institutional investor (QDII) scheme.

Ng said that the only person to have been directly hired for the new funds was London-based investment manager Sonja Laud, who joined Barings last year and will lead the multi-asset fund.

He added that he was looking to hire more analysts for the China team, but this was separate from the funds’ launch. 

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