Pending regulatory approval from the Financial Services Authority, the fund will launch in mid-June and will aim to provide investment returns above RMB deposit rates over the long term.
The strategy will invest primarily in RMB deposits and a diversified portfolio of investment instruments, including RMB government bonds, RMB corporate bonds and RMB quasi-governmental bonds. It may also invest in convertible bonds to enhance yield.
The fund will be domiciled in Luxembourg and seek a total return, inclusive of currency appreciation, in excess of 5% per annum over the longer-term with the majority of assets being held in RMB deposits through inception. Initial yields of approximately 1.0-1.5% are expected.
It will be managed by RCM, an asset manager that provides active investment strategies and a company of Allianz Global Investors.
Raymond Chan, chief investment officer Asia Pacific at RCM, indicated that there was a growing demand for the renminbi outside of China.
“While at present the use of the renminbi outside of China is limited, demand is very strong and we have seen the volume of renminbi deposits held offshore in Hong Kong rise by over 500% in the past twelve months,” he said.
Nick Smith, managing director at Allianz Global Investors Europe, said he anticipated considerable interest from investors in Europe.
He added: “We believe that the renminbi is substantially undervalued, but the options at present for investors to gain exposure to this growth story are extremely limited.”