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E Fund Management readies MRF bond fund

The Hong Kong subsidiary aims to launch a northbound fund targeting mainland investors.

E Fund Management (Hong Kong) has filed an application to sell the Select Bond Fund under the Mutual Recognition of Funds (MRF) scheme, according to China Securities Regulatory Commission (CSRC).

On 31 December 2019, the firm submitted the MRF application documents to the CSRC and the product is waiting for the approval.

The regulator’s record shows that it is the first time the firm filed a northbound application. If approved, E Fund will be permitted to sell the Hong Kong-domiciled fund to investors in mainland China.

The fund was originally launched in January 2018 and had assets of $660m at the end of last year, according to its factsheet.

“The US dollar-denominated fund primarily invests in a portfolio consisting of investment grade debt securities denominated in offshore RMB, US dollar, euro or Hong Kong dollars,” the factsheet noted.

The major geographic exposure is mainland China (79.5%). The top four sectors are real estate (18.2%), engineering and construction (15.3%), diversified financial service (14.4%) and banks (14.1%), according to the factsheet.

The Hong Kong subsidiary manages six Securities and Futures Commission (SFC)-authorised products, the other five being the Greater China Leaders Fund, the RMB Fixed Income Fund, the Select Greater China High Yield Bond, the Hong Kong Dollar Money Market Fund and the US Dollar Money Market Fund, according to FE Fundinfo.

SFC records show that the Hong Kong affiliate also manages four southbound funds, the ChinaBond 7-10 Year CDB Bond Index Fund, the Kexiang Mixed Fund, the Stable Return Bond Fund and the Value Growth Mixed Fund.

At of the end of September last year, E Fund managed RMB 1.3trn ($188.4bn) in assets, which includes onshore and the Hong Kong affiliate, the website shows.

Northbound enthusiasm

As of 8 January, there are 12 pending MRF applications, three of which were filed by HSBC Asset Management, and two are from China Asset Management Hong Kong, the subsidiary of Beijing-based China Asset Management.

Other applicants include JP Morgan Asset Management, Fidelity, Amundi, Taikang Asset Management and Pictet Asset Management, the regulator’s record shows.

JP Morgan AM already received two MRF approvals in January 2019 and another one in November. In total, the firm has three approved northbound MRF funds, leading the pack.

Last year, the CSRC approved five Hong Kong-domiciled products for mainland distribution under the MRF. Since the programme began in 2015, 17 northbound products from eleven firms have been approved by China’s regulator.

E Fund’s Select Bond Fund vs category average since inception

Source: FE Fundinfo. Cumulative returns in US dollars since the launch date. The fund does not have a benchmark.

Part of the Mark Allen Group.