Luxembourg grants landmark launch of RQFII fund
Luxembourg has granted landmark approval for the first renminbi-denominated qualified foreign institutional investor ETF to be launched under the Ucits umbrella.
The pioneers to launch it will be Deutsche Asset & Wealth Management and Chinese partner Harvest Global Investments. They will bring a Ucits version of db X-trackers’ Harvest China Fund, which listed in New York on November 6, as exclusively revealed by AsianInvestor.
“We are seeking to list the ETF on every exchange in Europe to give investors access,” Marco Montanari, Asia-Pacific head of passive management at Deutsche Asset & Wealth Management, says. “We will start the filing in the coming weeks.”
At present DeAWM has ETFs listed on exchanges in Germany, London, France, Italy and Switzerland. Montanari says all these are potential bourses to list a Ucits version of the RQFII ETF.
The official launch of the fund, when it happens, will mark a big step forward for China’s RQFII progarmme, which until now has only expanded to London outside of Asia.
The move comes after the two firms listed their RQFII ETF – db X-trackers Harvest China Fund – which will track the benchmark CSI 300 stock index, in New York Stock Exchange earlier this month.
Under this model, Harvest acts as sub-adviser. It has responsibility for applying to China’s State Administration for Foreign Exchange (Safe) for an RQFII quota and acts as the manager responsible for replicating the return of China’s equity market.
DeAWM is responsible for sales and distribution in Europe and the US. Under this arrangement, DBX Advisors can effectively run an RQFII ETF without an RQFII licence.
The db X-trackers Harvest China Fund raised $108 million during its IPO period in New York, which reports indicate is the largest launch among all equity ETFs in the US ETF market this year.
Montanari declined to comment on the quota that it will seek from Chinese regulators. “It is still under discussion,” he notes.
Within the Undertakings for Collective Investment in Transferable Securities (Ucits) scheme, the RQFII ETF will be able to be distributed throughout the European Union, as well as certain jurisdictions in Asia and South America.
“Hong Kong RQFII products cannot be publicly offered to US and European investors,” says Montanari. “These investors will be instrumental for the opening of the China market.”
Public-private partnership Luxembourg for Finance notes that the advance of RQFII within the Ucits scheme will be especially interesting for foreign fund managers using Luxembourg as a platform to distribute Ucits on a cross-border basis.
Harvest Global Investments was amongst the first Chinese asset managers in Hong Kong to obtain RQFII status in China and has launched four RQFII products, including two RQFII ETFs.
Harvest Global Investments is a wholly owned subsidiary of Harvest Fund Management, China’s second largest asset manager by assets.