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China AMC to launch IG bond fund

Investment grade bonds can be utilised as a defensive asset and they have a better yield than money market funds, according to the firm.

The ChinaAMC Global Investment Grade Bond has received approval for distribution to Hong Kong’s retail investors, according to Securities and Futures Commission (SFC) records.

The Hong Kong-domiciled fund is a new product and is denominated in US dollars, a Hong Kong-based spokeswoman for the firm told FSA. The planned launch date is 15 June.

“We’re engaged in conversation with several major distribution platforms with regards to onboarding this product,” she added, declining to name the distribution partners.

Moreover, the spokeswoman said that “during these unparalleled times triggered by Covid-19, investment grade bonds can be utilised as a defensive asset especially in a downturn scenario, as expected income from equity holdings [is under pressure].

Moreover, after the rounds of interest rate cuts, the firm believes there will be capital leaving money market funds that is likely to shift into high quality bonds that carry relatively low credit risk.

“The theme surrounding global investment grade bonds and its upside potential should not be overlooked the next 2-3 years or even over a longer horizon.

“Given the uncertainty in the magnitude and longevity of the ramifications from Covid-19, in addition to the recent turbulence in the global political landscape, we foresee an upward trajectory in market volatility.

“Under such a backdrop, we strongly believe that core assets and liquid assets would hold their prominence in asset allocation. Global investment grade bonds are considered front-runners in such assets, and we hold strong conviction in bonds issued by major economies that are backed by their respective governments’ support and relief efforts during downswings,” she added.

In fact, IG bond funds have been a topic recently.

Last September, before the coronavirus pandemic erupted,  JP Morgan Asset Management recommended investment grade corporate bond exposure for yield and defense.

In Singapore, Temasek-owned Fullerton is waiting for approval from the regulator for its Asian Investment Grade Bond Fund.

MRF funds

China AMC also intends to add the fund to the Mutual Recognition of Funds (MRF) channel, the spokeswoman said.

The firm has two other funds awaiting approval from the China Securities Regulatory Commission (CSRC) to be distributed through the MRF scheme, the China Focus Fund and the Select Fixed Income Allocation Fund, according to CSRC records.

The MRF between mainland China and Hong Kong is a scheme jointly launched in 2015 by the regulators in both jurisdictions. It permits eligible mainland and Hong Kong funds to be distributed in each other’s markets.

Separately, last month China AMC and Netherlands-based NN Investment Partners announced the launch of the NN (L) International China A-Share Equity Fund which the firms believe is the first ESG Ucits fund managed by a China-based asset manager.

Part of the Mark Allen Group.