The BEA Union Investments Asian Strategic Bond Fund aims for an average credit rating of investment grade (BBB- or above), meaning the high yield portion is less than half of the overall holdings, BEA Union’s managing director of business development Rex Lo told FSA. The fund has no benchmark, and can invest across all hard and local currency bonds.
It is differentiated from the firm’s existing BEA Union Investment Asian Bond and Currency Fund, which has fewer limitations on how it can invest in high yield and investment grade bonds, Lo said. This particular fund was a Platinum winner in the regional bond category in the 2017 FSA Fund Management Awards.
Pheona Tsang, head of fixed income at the firm, is the lead manager of both funds.
BEA Union’s new product has a similar approach to HSBC Global Asset Management’s recently launched Asia High Income Bond Fund, which limits the high yield holdings to a maximum of 45%.
A quick comparison of two new Asian bond funds
|BEA Union Investments Asian Strategic Bond Fund||HSBC Asia High Income Bond Fund|
|Expected average credit rating||BBB-||N/A|
|Expected duration||3.7 years||(modified duration) 4.51 years|
|Expected ongoing charges per year||1.28%||1.79%|
|Indicative top 3 country allocation||China 43%
Source: Fund brochure and product key facts document
BEA Union has 16 portfolio managers and analysts, four of which are on the fixed income team. As a joint venture between the Bank of East Asia (51%) and Germany-based Union Investment (49%) set up in 2007, it can leverage on latter’s global macro analysis, Lo noted. Union Investment can also refer European clients to the JV, he added.
Union Investment has already launched one Luxembourg-domiciled fund managed by BEA Union, he said.
BEA Union aims to take advantage of the Switzerland-Hong Kong MRF programme, Lo said. The Securities and Futures Commission and the Swiss Financial Market Supervisory Authority (Finma) reached a preliminary agreement on the programme last December.
“We are hoping the scheme can launch within this year,” he said.
Under this scheme, eligible Hong Kong-domiciled products can apply for authorisation to sell to investors in Switzerland.
Lo believes that due to BEA’s joint venture with German asset manager Union Investment, the firm’s Hong Kong-domiciled products will be well-positioned to sell in the Swiss market.
The firm is approaching Swiss banks and distributors to gauge their interest in Hong Kong-domiciled funds.
Among the 2,196 authorised unit trusts and mutual funds in the SAR as of 2016-end, only one-third (705) are domiciled in Hong Kong, according to the SFC’s quarterly report.
However, the number of Hong Kong-domiciled funds grew 11% from a year earlier.