Bridgewater becomes first hedge fund with CIBM access

The hedge fund giant and three other asset managers – Aberdeen, AllianzGI and BNP Paribas Investment Partners – have been approved to trade China's interbank bond market.
Bridgewater becomes first hedge fund with CIBM access

Bridgewater Associates, the world’s biggest hedge fund manager, last month received approval to enter China’s interbank bond market (CIBM), alongside Aberdeen, Allianz Global Investors and BNP Paribas Investment Partners. 

Bridgewater has registered seven fund accounts under the scheme – from its All Weather risk-parity product range – with the Chinese central bank last month, according to China Foreign Exchange Trade System.

The $160 billion manager – which set up an wholly foreign-owned enterprise in Shanghai in March, with a view to managing assets onshore – did not disclose how much its accounts planned to invest.

Bridgewater will be the first hedge fund firm to enter the CIBM programme. The People’s Bank of China had not been explicit about whether hedge fund managers could join the programme, but has said “medium-to-long-term investors” are eligible. 

Meanwhile, France’s BNPP IP registered one account for its Parvest Bond fund, German firm Allianz GI’s Singapore branch registered four for diferent share classes of one bond fund, and the UK’s Aberdeen registered three, for its global income fund, Asia income fund and Asian bond fund. 

UK-based Insight Investment Management, a subsidiary of US group BNY Mellon, was the first asset manager to register under the CIBM programme, in June; it now has six accounts.

The programme opened to foreign investors by removing the quota system in February.  

China is the world’s third largest bond market, accounting for 90% of the $8.7 trillion in domestic renminbi bonds at the end of 2015, according to Deutsche Bank research in late September.

Building traction

Other foreign fund houses to have registered CIBM accounts (in August and September) include Singapore-based alternatives manager Dymon Asia Capital, Hong Kong-based BEA Union and Italy's Generali Investments. Moreover, US-based Invesco told AsianInvestor in August that it planned to participate and expected to see as much as $400 billion flow into the CIBM from asset managers alone.

Under the scheme, foreign investors can choose to register their account at company or fund level. Asset owners, such as pension funds or insurance firms, will simply register a company account as they run their own money. But asset managers need to register several accounts, for individual funds or share classes, to ensure their clients’ beneficial ownership under each fund or class.

At least 50 accounts have been set up by foreign investors to trade the CIBM. Participation picked up strongly last month after the renminbi entered the International Monetary Fund’s special drawing rights basket of currencies on October 1. 

The main concerns among foreign investors in respect of the CIBM have been around the treatment of withholding tax and capital gains tax under the programme. But industry sources – including Standard Chartered, one of the CIBM settlement banks – told AsianInvestor the central bank had given informal clarification on certain tax issues last month.


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