HFT eyes Taiwan banks' offshore platforms

Like other fund firms, HFT Investment Management's Hong Kong arm is seeking to exploit a new distribution channel – Taiwanese offshore banking units.
HFT eyes Taiwan banks' offshore platforms

Ever since Taiwanese banks were permitted in February to sell offshore investment products via their offshore banking units (OBUs), asset managers have been busy looking to get their funds on those distributors’ shelves.

HFT Investment Management’s offshore arm in Hong Kong is one such firm. “We’re in talks with a few Taiwanese banks on several of our [RQFII] products,” says Jelle Vervoorn, chief executive of HFT IM.

Like Hong Kong and Singapore, Taiwan is a market with a lot of institutions holding offshore renminbi that are interested in RQFII investment, he notes. He declines to name these firms or which banks HFT is talking to.

Taiwan had Rmb214.5 billion in RMB deposits as of January. Of that figure, Rmb48.7 billion is sitting in offshore banking units (OBUs), and the other Rmb165.8 billion is in domestic bank accounts.

One of the products under discussion for being sold via an OBU is the HFT China RMB Money Market Fund, which the firm will launch this month.

The product will invest at least 80% in onshore money market instruments and up to 20% in offshore ones. It has a capacity of Rmb1.25 billion, comprising Rmb1 billion RQFII quota and Rmb250 million in offshore investment capacity. The fund will not hedge the currency risk, taking the view that the renminbi will continue to strengthen.

The target annualised yield for the MM fund is 4–4.5% after fees based on current market conditions, says Vervoorn. Onshore Chinese MM funds, such as Yu’e Bao, are heavily invested in negotiable deposits offered by banks and can offer a seven-day annualised yield above 5%.

That is because the underlying is different, says Vervoorn. “We want to invest in underlyings that international investors understand and which look like money market funds in other countries.” Hence HFT’s MM fund will mainly invest in short-term debt securities and MM instruments issued in China.

Once HFT’s MM fund gained approval from Hong Kong’s Securities and Futures Commission in February, there was demand from asset owners such as private wealth clients and fund of funds holding RMB. Most interest came from Asia, but there was some from Europe, including from corporate clients holding offshore RMB, notes Vervoorn.

Taiwan’s Financial Supervisory Commission announced new rules in February lifting the restrictions on types of investment products available to non-resident investors in Taiwan. As such, bank OBUs can offer clients offshore investment products, such as mutual funds registered outside Taiwan and RMB-denominated offshore funds.

Citibank Taiwan, for instance, has put 26 offshore funds, including RQFII products, on its OBU platform. The first batch of partners includes Allianz Global Investors, China Asset Management (Hong Kong) and Value Partners.


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