HFT readies landmark money market fund

HFT Investment Management's HK arm is set to launch the first RQFII money market fund. Meanwhile, RQFII applications are being readied in Singapore, and more RQFII and QFII quota has been awarded.
HFT readies landmark money market fund

The offshore branch of China's HFT Investment Management is readying the first money market fund under the renminbi qualified foreign institutional investor (RQFII) scheme, while asset managers are said to be seeking RQFII licences in Singapore.

Meanwhile, China's State Administration of Foreign Exchange (Safe) on Friday revealed the recipients of another Rmb11.6 billion ($1.89 billion) in RQFII quota and $900 million in QFII quota.

Ashmore Investment Management got Rmb3 billion in RQFII quota, becoming the first UK-based fund house recipient. It had been the first UK firm to receive an RQFII licence after the scheme expanded to London with Rmb80 billion quota in October.

The Hong Kong arm of mainland firm E Fund obtained an additional Rmb4 billion in RQFII quota, taking its total to Rmb24.7 billion.

Moreover, asset managers are also preparing to engage in the RQFII scheme in Singapore after the city-states's monetary authority started allowing financial institutions to apply for RQFII licences in January. The programme was extended to Singapore with Rmb50 billion in October.

BNP Paribas Securities Services is working with European fund managers that are seeking RQFII licences in Singapore, says Lawrence Au, head of Asia Pacific at the French firm. Managers want to obtain RQFII quota in the Lion City with a view to selling funds into Southeast Asia, particularly via the Asean passport scheme.

At this initial stage of development, pending RQFII products usually bond- and equity-focused, but Hong Kong fund houses are looking to diversify the type of RQFII product offerings.

Having received Rmb1 billion in quota from Safe in July, HFT Investment Management (HK) won approval in February from Hong Kong's Securities and Futures Commission to launch a China money market fund (MMF).

The fund will mainly invest in money market instruments issued on the mainland, both in the interbank market and those listed on exchanges, says Jelle Vervoorn, chief executive of HFT (HK). He did not give a time frame for the launch.

MMFs are popular in China and generally invest in interbank bond markets and deposits, and as such can generate good returns, because banks want to attract more deposits. Products such as Yu’e Bao, which is attached to Tianhong Asset Management’s MMF, can generate a seven-day, annualised return of around 6%. That said, the yield is on a downward trend, as banks have had more liquidity after Chinese New Year in late January.

But the yield spread between onshore and offshore is still attractive, argues Vervoorn, and “as long as there is spread, it is interesting”. Generally speaking, the yield spread between onshore and offshore can vary from 0.5% to 2.5% depending on the type of instrument.

Other recipients of RQFII quota last month were: CSOP, Guoyuan Asset Management and Haitong International, which each gained an additional Rmb1 billion; and DaCheng International and Galaxy International each received Rmb800 million.

The following firms acquired QFII quota last month: Fubon Securities Investment Trust, which got $200 million; the Bill & Melinda Gates Foundation, Goldman Sachs Asset Management, Samsung Investment Trust Management, Fidelity Investment Management (Hong Kong), Russell Investments and Bank of Lithuania ($100 million each); and Pictet Asset Management and CTBC Bank ($50 million each).

As of the end of February, Rmb180.4 billion in RQFII quota had been allocated to 59 institutions, and $52.3 billion in QFII quota had gone to 237 institutions.  

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