The Nikko AM China Onshore Bond Fund, targeted at retail investors, is being launched in partnership with the Bank of China and DBS Bank and follows the RMB1bn ($0.16bn, £0.09bn) quota awarded to the fund house.
According to Eleanor Seet, president of Nikko Asset Management Asia, the fund house has plans to build a suite of RQFII solutions following this initiative.
In May, the fund house had said it plans to float three-five products over the next three to five years including A shares and China balanced mandates.
Seet said: “This (the onshore bond fund) is the first in a suite of RQFII solutions we are planning to provide. We expect allocations into this market from both local and global investors to grow, especially with a long-term positive outlook on the currency.”
The onshore bond fund aims to offer a total return of capital growth and income over the medium to long term through exposure to RMB and listed and unlisted RMB denominated fixed income instruments.
The fund will invest primarily in a portfolio of RMB denominated certificates of deposits, preferred shares, fixed and floating bonds, convertible bonds, notes, bond and money market funds and other fixed income instruments issued onshore in the People’s Republic of China by governments, quasi-government entities, corporations and financial institutions.
Investors can invest in RMB through the Bank of China and DBS Bank when the fund becomes available in mid-July, after it obtains regulatory approval.
Nikko Asset Management said it was one of the first fund managers to launch an offshore RMB bond fund after the liberalisation of the Chinese bond market in November 2010.