Lyxor AM to launch RQFII China bond ETF

Jun 4, 2015

Lyxor AM says it will use part of its new Rmb6 billion quota to launch a China bond ETF, after it became the largest RQFII holder in France. It also plans to revamp its Asia product range over the summer.

Lyxor Asset Management plans to list an RQFII bond ETF in Paris and London next month, after it won a quota allocation.

The manager also intends to revamp its product offerings in Asia and could bring some Europe-listed exchange-traded funds to the Singapore market.

The French manager, a subsidiary of French bank Societe Generale, was awarded an Rmb6 billion ($9.7 billion) quota under the renminbi qualified foreign institutional investor (RQFII) scheme last Friday (May 29). It is the third Paris-based fund manager to win a quota from China’s State Administration of Foreign Exchange (Safe), after Carmignac Gestion and BNP Paribas Investment Partners.

Andrew Au, Hong Kong-based managing director and head of Asia ex-Japan at Lyxor, said the firm is planning to allocate Rmb4 billion of its RQFII quota to launch open-ended Ucits funds, including an upcoming China bond ETF, while Rmb2 billion will be allocated to client mandates from European clients.

The new physically replicated ETF will invest in government bonds in China’s onshore bond market via the RQFII scheme. It has been approved by France’s securities regulator Autorité des Marchés Financiers, and Lyxor is ready to list it on the Paris and London stock exchanges in July. The fund will be sub-managed by Fortune SG Asset Management (HK), the Hong Kong arm of a joint venture between Lyxor AM and Baosteel Group.

“We have an RQFII equity ETF listed in Europe now, and would like to offer another fixed income product,” said Au. The firm teamed up with Fortune SG (HK) to launch a Ucits RQFII ETF that tracks the MSCI China A index by using Fortune’s Rmb1 billion RQFII quotas in September last year. “We may allocate new quotas in that equity ETF but we can also access China A shares via the Stock Connect scheme in case there’s a shortage of quotas,” Au added.

The French manager plans to revamp its products this summer, and is looking to bring some Europe-listed ETFs to the Singapore market. The firm has 24 ETFs on the Singapore stock exchange, after it delisted 12 ETFs from Hong Kong in 2011.

“Because of the Ucits fund structure, we expect some European-based managers may have interest in trading these products in the Asia timezone,” Au said.