Citic Securities International (CSI) has expressed confidence it can double assets under management of its recently launched offshore RMB opportunity hedge fund within 10 months.
The fund, launched in mid-June, has so far gleaned $50 million in assets. But Craig Lindsay, managing director and chief operating officer for CSI Investment Management (CSIIM), says the company is targeting $100 million within its first year of operation, and eventually $1 billion.
“RMB is like the Japanese yen was 40 years ago, or where the euro was 20 years ago,” Lindsay tells AsianInvestor. “It will become a global currency within a few years. We want to be one of the early players to be part of the market, which is still evolving on both the FX and bond sides.”
To date, the Cayman Islands domiciled fund has recorded positive returns, says Lindsay. Assuming the renminbi appreciates by 5-7% annually, CSIIM expects the fund to generate 15-20% per year for investors. Lindsay confirms asset allocation counts for 80% of portfolio return.
The fund deploys multi-strategies focusing on foreign exchange, interest rate and fixed income securities denominated in RMB. Investment tools include RMB non-deliverable forwards, interest rate swaps and offshore RMB bonds and bonds issued by Chinese entities denominated in other currencies.
Lindsay notes that the fund has a long bias regarding RMB appreciation but is managed tactically, with directional trades, basis arbitrage and curve trading strategies deployed in its FX positions, and long/short used to trade bonds.
He points out that by using NDFs, swaps and bonds, the portfolio is hedged, while the portfolio manager will use credit derivatives and reduce exposure to mitigate risks.
The fund is managed by Li Lu, who joined the firm in March from China Construction Bank, where she managed a $5 billion proprietary investment portfolio.
Targeting offshore professional investors, the fund offers three classes denominated in Hong Kong dollars, US dollars and RMB. There is a 2% management fee, 20% performance fee and a 2% redemption fee for the first six months. Minimum investment is $1 million.