Eastspring Investments has filed an application with the Monetary Authority of Singapore (MAS) to launch three products, which are the China A Shares Growth Fund, the Asian Investment Grade Bond Fund and the Capital Reserve Fund, according to the regulator’s website.
The firm expects the products to be rolled out in the second half of this year, according to a Singapore-based spokeswoman of the firm.
The China A Shares Growth Fund and the Asian Investment Grade Bond Fund, which are Luxembourg-domiciled products, have been launched previously outside of Asia, the spokeswoman told FSA, adding that the firm is now bringing the products to the region. The China-focused product incepted in April last year while the Asian Investment Grade Bond Fund incepted in August 2018.
The Capital Reserve Fund, which is a fixed income product, is an entirely new fund.
The firm also plans to bring the three products to Hong Kong, she added.
The firm managed assets of $241bn as of the end of last year, according to the firm’s website.
A-share opportunities
Eastspring has already been offering China-focused products in Singapore, which include the China Equity Fund and the Greater China Equity Fund. However, these invest in offshore China equities, according to data from FE Fundinfo.
Eastspring was not able to confirm whether the China A Shares Growth Fund will be the firm’s first A-share offering to retail investors in the Lion City, however.
The firm believes that while China A-shares have outperformed most markets this year, it expects that there is further upside potential for the asset class.
“China’s structural drivers, domestic consumption, technological innovation and shifting demographics remain intact. Further upside potential exists for China’s A-share market and this will create new opportunities for investors,” the spokeswoman said.
The top ten holdings include Bank of Ningbo (4.3%), Shenzhen Mindray Bio-medical Electronics (4.1%) and electronic device manufacturer Luxshare Precision Industry (3.9%). The top three sectors include health care (20.4%), consumer staples (16.9%) and information technology (15.1%), according to the fund’s factsheet.
Fixed income products
Eastspring believes that the Asian Investment Grade Bond Fund is suitable for investors who are looking for a defensive product that also provides a “decent yield”.
“Asian IG credits offer an attractive yield-pick up over risk-free assets. Slower economic growth will impact the fundamentals of Asian IG names, but the risk of credit defaults and downgrades is expected to be manageable given Asian issuers have been prudent in their debt expansion and have strong funding access,” the spokeswoman said.
“Although the attractive yield of Asian high yield bonds might be appealing to investors, against a challenging macro backdrop, investment grade bonds will provide a more defensive play whilst providing a decent yield,” she added.
Meanwhile, the Capital Reserve Fund focuses on higher quality bonds and aims to have a shorter duration profile, which the firm believes should appeal to more conservative investors. The duration of the fund is expected to be around two years.
“The fund’s investment approach aims to achieve total returns from four levers: IG credits for spread carry (40-70%), high yield credits for alpha (10-20%), (hedged) local currency government bonds (0-25%) for interest rates carry and US treasuries & cash for liquidity and duration management (5-40%),” she said.
She noted that the firm is in discussions with various distribution partners for the Capital Reserve Fund.
“To date, we have had interest from bank distributors and family offices,” she said, but declined to elaborate.
The China A Shares Growth Fund vs category average since inception
