Posted inFund news

Schroders fund breaks MRF approval deadlock

After a 16-month freeze, China's regulator has finally approved a product for sale through the MRF - the Schroders Asian Asset Income Fund.


The multi-asset fund was approved last week by the China Securities Regulatory Commission for sale to mainland investors through the Mutual Recognition of Funds (MRF) scheme.

Schroders filed the application in July 2015 and the fund was among the first batch of products hoping to get into the cross-border retail sales program. While six MRF funds are already selling northbound to mainland investors, a dozen other funds still await approval.

“We observe that MRF northbound funds that exist in the market are typically either straight equity or bond funds,” said David Guo, Schroders head of China business.

The firm believes the multi-asset product may provide a new channel for onshore investors to diversify their investments with an income theme.

Bank of Communications Schroder Fund Management, the mainland mutual fund joint-venture, and Schroders, are in talks with mainland fund distributors and are looking into online distribution, a spokesman added.

The Hong Kong-domiciled fund was launched in the SAR in June 2011, with HK$37bn ($4.8bn) of assets under management as of April-end.

Signal for more approvals?

The approval of this product, with a multi-billion dollar AUM, might hint that the CSRC is less worried about capital outflows, as northbound MRF funds can raise as much as 50% of assets from onshore China.

However, the 12 other funds under review by the CSRC can only wait. Several asset managers including BOCI-Prudential Asset Management, Bank of China Hong Kong, Hang Seng Investments, HSBC Global Asset Management and Amundi, submitted the applications roughly the same time as the Schroders fund.

In contrast, about 48 mainland funds have been granted greenlight to sell in the SAR, although only about half of them began actual sales amid weak demand for onshore assets.

“I hear there is a high degree of dissatisfaction among other managers [in regards to the Schroders fund approval]. Why has Schroders been given this when others have been waiting longer?” said Stewart Aldcroft, Asia-Pacific senior adviser for markets and securities services at Citibank.

He hopes to see more approvals, which would mark “a new phase from the CSRC to allow more Hong Kong funds under the MRF program”.

The state-run publication Securities Times cited sources that said recent increasing redemptions from northbound MRF funds are mainly due to the stabilisation of the RMB and expected weaker demand for overseas assets.

The three-year performance of the seven MRF funds approved to sell in the mainland China, according to FE.



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