Lim noted that investing in onshore RMB bonds may include bonds traded both in the China interbank bond market and on domestic stock exchanges. These trades are made through the fund’s qualified foreign institutional investor (QFII) and renminbi qualified foreign institutional investor (RQFII) quotas.
“There is a dynamic allocation between onshore, offshore and US dollar issues to enhance returns while maintaining a high credit quality of the portfolio,” Lim said.
The Fullerton fund’s onshore bond allocation is primarily in Chinese government bonds and in bonds issued by state-owned banks that are used for government spending (policy banks), Lim added.
She likes the fact that the duration of most CNH bond issues are between 1-3 years, making them less sensitive to changes in interest rates.
In contrast, the focus of the ChinaAMC fund is mainly on onshore corporate bonds. While the fund maintains a 5% flexibility call to invest in convertible bonds, its investment mandate does not allow exposure to equities.
ChinaAMC gains access to corporate bonds through its RQFII quota.
Led by Zhu Can, the team at ChinaAMC employs a bottom-up selection of bonds that fits their investor risk appetite. Lim noted that ChinaAMC’s current strategy focuses solely on fixed income securities.
A snapshot of the two funds:
| Fullerton Fund | ChinaAMC Fund | |
| Launch | 7 May 2013 | 21 Feb 2012 |
| AUM | $207.2m | ~$175m |
| Average duration | 2.5 years | 1.95 years |
| Yield to maturity | 5.0% | 4.63% |
| Top 5 holdings |
China government bond 4% Sep 2017 – 5.5% China government bond 2.76% Feb 2016 – 4.6% China government bond 3.99% Jul 2016 – 3.1% China government bond 4% Jun 2024 – 2.4% Global Logistic Properties 3.375% May 2016 – 2.4%
|
Xining City Investment Management 7.7% – 5.31% Lanzhou City Development Investment 8.2% – 4.99% Guizhou Railway Investment 7.2% – 4.57% Harbin City Planning Investment Group 7.08% – 4.52% Wenzhou Anjufang City Development 7.65% – 4.40% |
