China's E Fund plans active and passive funds in EMEA

Added 28th July 2016

China concerns have shifted away from currency worries to rising defaults and the overall debt level, said Jessie Lam, head of European business at E Fund Management in Hong Kong.

China's E Fund plans active and passive funds in EMEA

Jessie Lam, head of European business at E Fund Management (Hong Kong)

E Fund's clients are in Europe, the Middle East and Africa. “Clients are mainly financial institutions from UK, Italy, Switzerland, the Nordics and the Middle East,” said Hong Kong-based Lam in an e-mail reply.

The firm is also talking to insurance groups and sovereign wealth funds, she added.

In April, the firm launched a UCITS fund in Europe, the E Fund Collabrium High-Quality RMB Bond Fund.

“We also have several strategies in the pipeline for both actively managed funds and index linked leveraged ETFs to further expand the spectrum of our offering to institutional investors in the region,” she added.

The one-way depreciation of renminbi, beginning last August, were investors’ biggest concerns late last year, but not anymore, Lam said.

They are now more concerned that "the level of corporate debt and rising rate of corporate defaults might cause a problem for the opening up of the debt market as a whole.”

Jeffrey Qi, one of the managers of the UCITS bond fund, who also runs two bond mutual funds in Hong Kong, said he has generally avoided the credit bonds with medium to low ratings since the beginning of this year.

Amid spiking defaults seen in corporate bonds this year, Qi said the overall situation for privately-owned small to medium enterprises is worrying. "They are facing more difficulties in financing, as well as a worsening business environment."

On the contrary, some industrial sectors that have been facing overcapacity problems, in particular the coal and steel sectors, could perform well with more merger and acquisition activities driven by the government's intention to weed out underperforming state-owned companies, he noted.

UK connection

In 2014, E Fund partnered with London-based ETF Securities to list an ETF tracking the MSCI China A index on three European exchanges.

Despite the partnership, the firm has reconsidered a plan to set up an office in the UK after Brexit, the firm told Reuters in an interview (in Chinese) earlier this week.

“Currently, focus is more on catching up with the appetite and demand for the right kind of products for investors in EMEA areas,” Lam noted.

The international arm of Guangzhou-based E Fund has offices in Hong Kong and New York, in which the latter is pending license approval. E Fund is ranked the fourth largest mutual fund house in the mainland with RMB 394.8bn of assets under management as of June 30, according to data provider Wind.


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