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JPMAM to launch two MRF funds

JP Morgan Asset Management (JPMAM) has gained approval from China’s regulator to distribute two funds into the mainland through the Mutual Recognition of funds scheme.

The China Securities Regulatory Commission (CSRC) has given the go-ahead to the US fund manager to sell its Global Bond Fund and Asia Equity Dividend Fund through the China-Hong Kong Mutual Recognition of Funds (MRF) scheme.

“Both newly-approved funds provide complementary approaches to the existing MRF offerings, serving different client needs in their respective asset classes and in the context of a diversified portfolio,” according to a firm statement.

The Asia Equity Dividend Fund was first submitted to the CSRC in May 2016, and the Global Bond Fund followed in  December 2017, according to a JPMAM spokeswoman.

The firm’s joint-venture, China International Fund Management, will distribute the funds in the mainland. The joint venture also offers three MRF southbound funds: CIFM China Emerging Power, CIFM China Sector Rotation and CIFM China Multi-Assets.

The CSRC had previously approved for northbound sale in China two other of the firm’s products, Asian Total Return Bond (in December 2015) and Pacific Securities (in February 2016).

Volatility play

China’s equities markets were among the world’s worst performers last year, so the firm hopes that the launch of the two funds is timely for mainland investors seeking offshore diversification.

The $457m Global Bond product invests 90% of its non-cash assets in international investment grade bonds with an objective to earn a return in excess of global bond markets. The yield on the fund was 3.92% as of  31 December 2018, and it typically pays out a distribution of 3.2% in US dollar terms, according to the spokeswoman.

“We feel that Chinese investors have long had a low allocation to this segment of the market, and these bonds can generally be characterised as having lower volatility than emerging market bonds and equity markets,” she said.

The $1.3bn Asia Equity Dividend Fund aims to provide income and long-term capital growth by investing mainly in high dividend-paying Asia Pacific (ex-Japan) equities.

The firm believes the portfolio balances yield and capital appreciation with comparatively lower volatility.

The MRF scheme was launched in July 2015 and allows eligible mainland and Hong Kong funds to be distributed in each other’s markets. Funds have to meet a set of requirements, including asset size and domicile.

A total of 50 China-based funds have been approved for distribution in Hong Kong since the scheme launched, while only 17 Hong Kong-registered funds have gained approval, according to the Securities and Futures Commission.

These include HSBC Global Asset Management’s Asia-Pacific ex-Japan Volatility Focused Fund, which was launched last October after a two year wait.

JP Morgan Asia Equity Fund vs benchmark and sector average

Source: FE Analytics (in US dollars)

JP Morgan Global Bond Fund vs sector average (benchmark unavailable)

Source: FE Analytics (in US dollars)

Part of the Mark Allen Group.