Pictured: Luke Ng, senior vice president of research at FE Advisory Asia
Roughly 50 renminbi qualified foreign institutional investor (RQFII) funds are available for sale in Hong Kong. These funds allow foreign investors access to onshore RMB fixed income securities.
In this week’s head-to-head, FSA has chosen to take a closer look at the best performer and the worst performer in this category of funds: the E Fund RMB Fixed Income Fund and the CMS China Opportunities Flexifund.
Both funds launched in the first quarter of 2012 and grew to accumulate assets surpassing RMB 500m ($72.5m) by the end of 2015. In May 2016, both funds suffered large withdrawals from their institutional share classes. The redemptions amounted to 75% of the E Fund product’s AUM and a whopping 98% of assets in the CMS fund.
E Fund’s manager nevertheless stuck to his investment strategy through 2016 and into 2017, delivering three-year performance at the top of its category as of 8 June.
CMS, on the other hand, took a gamble by switching from bonds to convertibles in the second half of 2016, a move allowed by the fund’s mandate. The gamble did not pay off, however, and the fund is currently the worst performer in the category.
FSA has reached out to CMS for comments, but has not received a response.
|E Fund RMB Fixed Income||CMS China Opportunities Flexifund|
|Inception||28 February 2012||12 March 2012|
|Size||RMB 219m (30 June 2016)||RMB 11.6m (31 December 2016)|
|Manager||Sabrina Wang, Jeffrey Qi||CMS Asset Management (HK)|
Putting the RQFII funds in a broader context, Luke Ng, senior vice president of research at FE Advisory Asia, said the lack of consensus on the direction of the RMB make fund managers in this sector “relatively cautious about the asset class at the moment”.
In addition, RMB bond issuance has been high in 2017 compared to the year before and many bonds will soon be reaching maturity, prompting roll-overs, which could add to the pressure on the asset class overall, according to Ng.
Ng provides a comparative analysis of the best and worst performer in the category.