JF Asset Management will launch a fund next week that is the first registered in Hong Kong that provides the retail market with direct access to A shares. The JF China Pioneer A-Share Fund can invest in A shares via JFÆs own $150 million quota as a qualified foreign institutional investors (QFII).

Douglas Eu, CEO at JFAM in Hong Kong, says this is the first product that gives Hong Kong retail investors direct exposure to A shares, as opposed to structured products such as participatory notes or equity-linked notes. The firm expects to raise more than $150 million from Hong Kong clients û distributed both directly and through commercial and private banks. The fund can also invest in other securities, such as H shares, B shares, China-oriented listed companies or cash. But the objective is to maximise A-share exposure so at least 70% of the fund must be invested in Chinese securities.

He says investing through JFAMÆs own QFII quota is an advantage because it means investors donÆt need to pay the fees of a third-party quota provider. It also means the fund managers donÆt have to jostle for space in othersÆ quotas.

China International Fund Management, parent JPMorgan Asset ManagementÆs fund-management joint venture with Shanghai International Trust & Investment, will sub-advise the new fund. The fund will be managed in Hong Kong by Howard Wang, head of JFAMÆs Greater China investment team, and by newly hired portfolio manager, Huang Shumin.

The fund will use the Xinhua FTSE 600 Index as a benchmark, but Wang says the fundÆs objective is not to replicate that. Instead it will look for 60-80 core holdings. ôWe want either great companies in okay industries, or okay companies in great industries,ö he says. Overall he sees China transitioning from a classic Asian story of high savings rates and export-orientation to one of growing domestic consumption, and the fund will seek A shares that reflect this where H shares do not, such as in the defence sector.

QFII quotas cannot be readily repatriated; in the event of mass redemptions, Eu says, the fund can impose redemption gates or, in extreme cases, borrow to meet its obligations. The fund begins trading on July 3.