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Another cross-border tie-up in Malaysia

A local asset manager’s arrangement with BOCHK is the latest in a spate of investments in foreign funds.

Kuala Lumpur-based Areca Capital has set up a feeder fund arrangement to invest in BOCHK Asset Management’s All Weather China High Yield Bond Fund, according to a local press report.

The Areca Flexi Fixed Income Fund has already made an initial investment of RMB 1.62m ($240,000), the report said.

BOCHK’s All Weather China High Yield product aims for long-term capital growth and income in RMB terms. It invests mainly in RMB-denominated fixed income and debt securities.

Most of the portfolio is in BB rated bonds or above with several of the top holdings in Chinese property company bonds, according to FE data.

Average yield to worst is 7.7% with average duration 1.8 years, according to the factsheet.

The fund  (which is s a sub-fund of BOCHK Wealth Creation Series) has far outperformed the peer category average over one-, three- and five-year periods, FE data shows.

Areca officials said they would consider more feeder arrangements as well as the possible distribution of BOCHK AM’s funds through Areca’s third-party funds platform, according to the report.

Shen Hua, CEO of BOCHK AM, said the tie up with Areca underscores the importance of RMB bonds as a new asset class.

He added that “ever since the RMB internationalisation, we saw pick-ups and more demand of RMB denominated products”, according to the report.

Cross-border increase

The BOCHK partnership is one of an increasing number of arrangements between Malaysian asset managers and offshore firms as domestic investors seek ways to diversify offshore.

Last month, RHB Group Asset Management’s fund announced it will feed into Blackrock’s China bond product.

Also in June, Kuala Lumpur-based Affin Hwang launched a locally-wrapped version of UBS Asset Management’s China A Opportunity Fund for sale to Malaysia’s qualified investors, according to a statement from the firm.

Other foreign managers are also introducing products in Malaysia. BNPP AM plans a product push in Malaysia using the feeder fund route, and Schroders has set up a partnership with Maybank for domestic fund distribution.

The BOCHK All Weather China HY Fund vs the category average

Source: FE, three year cumulative returns in US dollars. The fund does not use a benchmark index.

Part of the Mark Allen Group.