Da Cheng International Asset Management is set to become the first Chinese fund house to launch an independently managed equity fund distributed via retail channels in Hong Kong and Macau.

As one of the first batch of Chinese managers to set up an overseas arm in Hong Kong, Da Cheng has set out from the start to enter the city's competitive retail market.

Its Da Cheng China Core-Satellite Equity Fund is due to launch on November 21 and will be available at several retail banks and insurance firms in both Hong Kong and Macau.

During an interview with AsianInvestor last year, Doris Lian, chief executive of Da Cheng International, voiced her ambitions to extend the firm’s core competence of managing mutual funds in China to overseas markets. The company now manages three Hong Kong-listed ETFs.

While some Chinese asset managers partner with banks by acting as a sub-manager – such as the cooperation between China AMC and Citi on the China Select Fund – Da Cheng International takes an independent approach to develop its own intermediary distribution network in Hong Kong.

The new product will be Da Cheng’s fourth public fund, leveraging its stock-picking capabilities.

It launched two ETFs last year: Da Cheng CSI Hong Kong Private-owned Mainland Enterprises Tracker and Da Cheng CSI Hong Kong State-owned Mainland Enterprises Tracker. 

As of May 31, the two funds combined represent 85% of the state-owned and 52% of the private-owned mainland enterprises listed in Hong Kong, respectively. 

For the new core-satellite fund, about 60% of its portfolio will consist of the above two ETFs (core), with the remainder allocated to 20-30 individual stocks (satellite) through bottom-up selection, industry rotation and thematic investment strategies.

Da Cheng sales director Victor Lau notes that the strategy is designed to weather the current high market volatility and at the same time leave room for the fund manager to generate alpha.

“Within the core part, the fund manager will use the index-balancing strategy to actively manage the percentage of each ETF according to different market timing and situations”, says Lau, “In the satellite part, the manager will pick China-themed stocks with high-growth potential, from sectors such as consumption, resources, IT and financial.” 

The IPO period of the new fund will last until December 9. Citibank's Hong Kong Branch is the custodian of the fund. The management fee is 1.5%, while the upfront fee is up to 5%.