E Fund Management (Hong Kong) is looking to launch a renminbi-denominated QFII retail fund by the end of the year, most likely a hybrid biased towards onshore China fixed-income instruments.
The firm has completed due diligence and signed distribution deals with a number of local banks. Assuming it obtains regulatory approvals from the mainland (Safe, CSRC and PBOC) and Hong Kong (SFC), its RQFII product is expected to be available for retail investors before the end of December.
“Since the initial RQFII quota will be very limited [Rmb200 billion], E Fund will choose not more than five banks as primary retail distributors and is now working on the marketing plan specifics,” notes Marie Chew, business development director of E Fund Management (Hong Kong).
Charles Wang, the firm’s CEO, adds: “Although final guidelines haven’t been confirmed, the fund is most likely to be a hybrid fund with 80% invested in fixed-income and 20% in equities.”
Having been engaged in dialogue with regulators both in Beijing and Hong Kong, E Fund believes the Rmb200 billion quota will be shared evenly among all qualified Chinese managers.
“For us, the key is not how much quota we will get, but rather that the RQFII [scheme] puts us on the stage to develop a track record of performance,” says Wang. “When China’s financial market opens up further and the circulation of offshore RMB grows, the business potential is going to be huge.”
The RQFII fund is likely to be E Fund’s only public fund in the near term. “Not only is the public fund space highly competitive, it is also over-serviced,” Wang notes. “It’s hard to gain much market share from competitors even if with better performance. We would rather focus on strategies with unique value propositions.”
He adds: “To be successful, you have to stay focused. We are aggressive in terms of customer acquisition but also realistic in product planning. Our core competence is Greater China and global emerging markets.”
At present, E Fund has three private funds targeting professional investors, namely Greater China long/short fund (launched in January 2009), emerging market long-only fund (launched on May 1) and emerging market long/short fund (launched on August 1).
Wang, who joined E Fund (Hong Kong) in July last year, is the lead fund manager of the emerging market funds.
He spent 10 years investing in global emerging markets at Acadian Asset Management, where he managed the Acadian Emerging Markets Portfolio fund from 2000 until 2010. The Fund was ranked number 1 among other global emerging market funds domiciled in the US, by Lipper, for the 10-year period ending 2009.