The New Capital Wealthy Nations Fixed Maturity Bond Fund 2023 was this week authorised by the Securities and Futures Commission for sale to retail investors in Hong Kong, according to the regulator’s website.
It will be a newly-created product, and follows ESGAM’s launch of a four-year FMP in March with the same investment mandate. It is also issued under the umbrella of the New Capital Hong Kong Unit Trust Series.
The product will be launched on 4 September 2020 and will be managed by Michael Leithead and Camila Astaburuaga, the firm’s lead portfolio managers of EFGAMs flagship fixed income funds, a spokeswoman told FSA.
At least 70% of the portfolio will comprise bonds issued by “wealthy nations” or by companies within them. The firm defines wealthy nations as countries whose net foreign debt (as determined by the World Bank) is less than 50% of their GDP.
The fund will have “an overall investment grade, hard currency portfolio that aims to invest in strong credits in strong countries which have the financial resources to support their economies and managing increasing levels of debt,” said the spokeswoman.
“[But] the portfolio is not bound by the traditional definition of emerging markets and developed markets,” she added.
EFG currently offers six funds to Hong Kong retail investors, including its four-year FMP and its conventional $1.9bn Wealthy Nations Bond Fund, which was incepted in 2011.
The AUM of ESG’s New Capital Wealthy Nations Fixed Maturity Bond Fund 2024 so far amounts to $56m, and pays a dividend yield of 3.04%, according to Bloomberg data.
However, the firm declined to comment about the timetable for the launch and distribution of its latest product.
Other asset management firms operating in Hong Kong that have launched FMPs recently include Invesco and Amundi.
Invesco completed the IPO of its Asian Bond Fixed Maturity Fund 2021-I on 21 July, and has AUM of around $288 million, an Invesco spokesman told FSA. A second strategy, the Invesco Asian Bond Fixed Maturity Fund 2021–II, began fundraising on 7 August and will close on 26 August, he added. Both funds invest predominantly in investment grade credits.
Meanwhile, the Amundi HK Asian Bond Fixed Maturity Fund 2023 has gathered assets of $27m since its launch at the end of April, and has an annualised dividend yield of 3.2%, according to its factsheet.
Income demand
FMPs gained popularity among global investors last year on expectations of falling US interest rates and bond yields, precipitating a search for products that could generate a reliable source of income for a specified time period.
Many asset managers offered products with mandates ranging across the risk spectrum, including US investment grade bonds, global high yield, Asian credit and emerging market debt.
The funds typically deploy a “buy and maintain” approach to avoid re-investment risk, and aim to provide future cash flow security, offer low volatility and mitigate interest rate risk. But income, returns and capital are usually neither guaranteed nor protected.
FMP issuance has continued in 2020, but not at the same frenetic pace despite the demand for income among retail investors being even greater than last year.
The 10-year US Treasury yield plunged to a low of 0.5% in response to Federal Reserve bond purchases and a shift to safer assets among investors. High quality investment grade corporate bonds have also rallied strongly, forcing income-seekers to turn to lower quality credits for extra yield.
