The bond fund, incepted in August 2013, saw net asset value drop to RMB 14.5m (as of 23 January) from RMB 146.8m at the end of December, according to the the firm’s website. The number of holdings fell to just 2 from 19 during the same period.
On January 24, the fund house announced it would suspend determination of the fund and issue redemption applications for units to investors.
“Due to the relatively low net asset value, it has become increasingly difficult for the manager to dispose of the bonds held by the [fund], which are of a relatively small quantity, at a desirable price on the market,” the firm said in a statement.
The ongoing charges borne by the remaining unitholders also continuously increase as the NAV drops, it added.
A spokeswoman from the firm declined to comment.
The distributors are Bank of Communications, Bank SinoPac, E Sun Commercial Bank, KGI Asia, HSBC Hong Kong Private Banking as well as Yuanta Securities (Hong Kong), according to the firm’s website.
RMB bond turmoil
RMB bond funds have become the worst performing category in 2016, returning -6.8% in US dollar terms, FE data showed. The decline is partly due to the weakening yuan and worries about rising default risks. Last November, Blackrock announced it would shut the iShares RMB Bond Index ETF.
The E Fund RMB Mainland China Bond Fund and E Fund RMB Fixed Income Fund, both managed by Hong Kong-based portfolio manager Jeffrey Qi, received five-star ratings from Morningstar. The latter is still available for sale in the SAR.
Last August, Qi had warned about possible interest rate tightening in China. Last week, the People’s Bank of China indeed raised the money market rates, triggering concerns about market liquidity and leveraging problems.
The fund house, a subsidiary of Guangzhou-based E Fund, late last year launched two Hong Kong-domiciled funds – the E Fund Greater China Leaders Fund and the E Fund Global Bond Fund.
Three-year performance of the E Fund RMB Fixed Income Fund, versus category average, according to FE.