These are the $1.29bn HSBC Asia High Income Bond Fund, $836m HSBC Asian High Yield Bond Fund and the $136m HSBC GIF Asia Bond Fund.
The other three products to gain approval from the China Securities Regulatory Commission (CSRC) this month for distribution in the mainland via the Mutual Recognition of Funds programme are the $52m Amundi Disruptive Opportunities Equity Classic Fund, $467m JP Morgan Asia Growth Fund and $174m Pictet Strategic Income Fund.
The MRF between mainland China and Hong Kong is a scheme jointly launched by the CSRC and the Hong Kong Securities and Futures Commission (SFC) in July 2015. Under the scheme, eligible mainland and Hong Kong funds can be distributed in each other’s markets.
Net sales for northbound funds sold under the scheme reached RMB 7.16bn ($1.03bn) for the full year 2019, compared with an outflow of RMB 3.44bn in 2018, according to the State Administration of Foreign Exchange.
Analysts attributed the increased demand for overseas invested funds to a need for asset diversification during a period of slowing domestic growth, exacerbated by the US-China trade dispute. The uncertainties caused by the coronavirus epidemic provides another reason for spreading investment risk.
The three HSBC bond funds now available to mainland investors have generated similar annualised returns of between 4.76% and 5.38% over the past three years, and all include Alfred Mui, HSBS GAM’s head of Asian credit as a co-manager, according to FE Fundinfo. The high yield and high income bond funds both have significant overweight positions in US-dollar denominated China fixed income securities.
The strongest performing of the six funds newly approved by the CSRC is the smallest, the Amundi Disruptive Opportunities Equity Classic Fund, which has generated a three-year cumulative return of 55.93%. Three-quarters of its holdings are in North America, and it has a 40.53% allocation to information technology stocks, according to the fund’s most recent factsheet.
The JP Morgan Asia Growth Fund has a 41.5% exposure to China, and its top holdings include Alibaba and Tencent, as well as Taiwan Semiconductor Manufacturing, Samsung Electronics and AIA Group, which have major weightings in the fund’s benchmark MSCI Asia ex-Japan index.
Finally, the Pictet Strategic Income Fund has an eclectic mixture of holdings that includes developed and emerging market bonds, technology stocks, alternatives and gold, according to its factsheet. The fund will be distributed in China by Tianhong Asset Management, a spokeswoman told FSA.
Since the MRF programme began, 23 northbound products from eleven firms — including the latest six funds — have been approved by China’s regulator.
These include, another JP Morgan product, its Pacific Technology Fund which was approved for northbound distribution in November.
There are currently six funds that are awaiting CSRC approval, including two from China Asset Management’s Hong Kong subsidiary, and funds managed by Fidelity and Taikang AM, according to the regulator’s website.
Comparative data for six funds newly approved for China distribution under MRF scheme
| Fund |
AUM ($) |
3-year cumulative return | 3-year annualised return | alpha | 3-year annualised volatility |
Information ratio |
| Amundi Disruptive Opportunities Equity Classic |
52m |
55.93% | 15.72% | 3.54 | 16.40% |
0.69 |
| HSBC Asia High Income Bond |
1.29bn |
17.15% | 4.76% | 3.47 | 2.29% |
0.21 |
| HSBC Asian High Yield Bond |
836m |
15.33% | 5.38% | 3.13 | 4.20% |
0.30 |
| HSBC GIF Asia Bond |
136m |
15.18% | 5.02% | 1.10 | 2.31% |
1.10 |
| JP Morgan Asia Growth |
467m |
55.92% | 16.82% | 7.35 | 16.47% |
1.80 |
| Pictet Strategic Income |
174m |
19.67% | 6.23% | 1.85 | 6.02% |
0.17 |
Source: FE Fundinfo (Data in US dollars, 24 February 2017 – 20 February 2020)
Comparative performance of six funds newly approved for China distribution under MRF scheme
