Duo launch RQFII funds, target second batch of quotas

HFT Investment Management (HK) and GF Asset Management are adding two renminbi-denominated qualified foreign institutional investor (RQFII) funds for retail investors in Hong Kong.

Both are RQFII fixed-income funds, meaning they must invest at least 80% of their assets in bonds. The IPO period for HFT’s product starts today and for GF’s fund tomorrow.

The two firms obtained RQFII investment quotas of Rmb1.1 billion and Rmb900 million, respectively, from China’s State Administration of Foreign Exchange (Safe) in December.

HFT’s fund will target stable capital growth by only selecting investment-grade bond securities and playing defensively in the equity market. Executive director Jelle Vervoorn says large-cap A-share stocks will be preferred over small- and mid-caps.

GF AM, the Hong Kong-based asset management arm of GF Securities, will allocate no less than 90% of its fund to bonds this year, mainly government and triple-A-rated corporate debt.

HFT will reinvest all income from the underlying assets and not pay any dividends, as its target clients are chiefly those who hold renminbi for saving or investment purposes, says Vervoorn. To fit with their objective of wealth accumulation, he adds: “We strongly believe in leaving the investor in charge of whether to withdraw any possible returns from the fund.”

GF’s fund, meanwhile, plans to distribute dividends in March, June, September and December each year, subject to the management’s discretion.

Meanwhile, Safe has signalled its intention to release a second batch of RQFII quotas this year. Vervoorn says HFT is prepared for this move and will consider investing into asset classes other than fixed income, such as A-share exchange-traded funds, in line with the cautious and conservative approach of the pilot RQFII scheme.  

As for HFT’s outlook on the renminbi, chief executive Chi Lo argues that RMB internationalisation will take over from RMB appreciation as the policy focus in the coming decade. In addition, underlying pressure for RMB appreciation will decline, he says, as China’s current-account surplus has shrunk significantly, which reduces excess demand for the currency.

Both HFT HK and GF Asset Management charge retail investors management fees of 1.2%. HFT’s fund is only available to the retail market, but GF also offers its product to institutional clients.