UBS SDIC introduces leveraged index fund to China

The funds JV is looking to tap into Chinese appetite for more exotic products; meanwhile, it also finds a new CIO.

UBS SDIC, the Swiss bank's 49:51 joint venture with the State Development and Investment Corp in China, plans to list its index-tracking CSI300 fund on the Shenzhen Stock Exchange. The fund is 95% benchmarked to the CSI300 index, which tracks prices of the 300 most active stocks listed on the Shanghai and Shenzhen bourses. The remaining 5% follows the local interbank interest rate benchmark.

Daily tracking error will be limited to under 0.35%, or 4% on an annualised basis. A level of 1.6x leverage is built into the fund giving investors magnified returns from the index's movements.

The fund prospectus says calculation of the fund NAV will be performed annually. ICBC is the fund's appointed custodian.

Wednesday marked the last day of the initial fund raising effort, but the result has yet to be announced. UBS SDIC is generating good media buzz in China for venturing into the land of exotics in an otherwise overdone product idea based on the CSI300. A dozen funds tracking the CSI300 already exist in the market.

Meanwhile, the JV has also found a new CIO after a year-long search. Marc Tan is a Singapore native who has previously served as an executive director at UBS AG; as assistant general manager at China Merchants Fund (a JV with ING Investment Management); CIO and interim general manager at OUB-Optimix; and senior fund manager in charge of China strategy at the Overseas Union Bank.

According to statistics provided by Z-Ben Advisors, as of end-August, UBS SDIC has a total AUM of Rmb25.5 billion ($3.74 billion) and a market share of 1.16%. It is the 29th largest firm in an industry of 60.

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