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The quant vehicle, which will start trading in March, will access new companies listing on the mainland, in Hong Kong and in the United States. It will hold a portfolio of around 20 names and be capped at $500 million in the interests of maintaining unit-holder market access.
The key reason for launching the fund, according to Nick Thompson, head of non-flow structured product sales at Macquarie Equities, is to leverage its institutional access to the IPO market to benefit retail investors.
ôSeveral IPOs have been launched into the Hong Kong market,ö he says. ôRetail investors have found that they cannot get access to the number of shares they want. IPO investing has been around for some time in the US and there are established products. A series of indices has also been created.ö
One of the main benefits institutional investors have in the eyes of those who market IPOs, Thompson believes, is that they are less fickle than retail investors, and because of this the new fund should reveal the full benefits of longer-term investing.
ôIt is crucial that we get retail investors to take a disciplined view,ö he explains. ôThere are only so many listed Chinese companies. It is a relatively small capital market and we believe this fund is a long-term investment.ö
The investment process begins with the purchase of an equally weighted portfolio of China IPOs, after which the stocks are rebalanced by removing the longest-held position, rebalancing and applying for an allocation in another target IPO.
The fund is not permitted to buy investment companies or Reits and, in order to ensure liquidity, will only target listings with a market capitalisation of at least $200 million.
The fundÆs distributors include Hong KongÆs major retail banks and securities companies, and Macquarie has also signed a deal with an independent adviser. The minimum initial subscription is HK$23,400 and minimum top-up HK$7,800. The fund has a front end charge of up to 5% and annual management fee of 1.5%. It also has a performance fee of 10% of any annual return above 5%, with the watermark compounded over each subsequent year in the life of the fund.
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