Standard Chartered Bank in China has agreed to distribute Blackrock’s China US Dollar Bond Fund, which invests in US dollar-denominated offshore Chinese bonds, according to a statement from the bank.
The bank is able to distribute the product to mainland retail investors via its qualified domestic institutional investor (QDII) licence. The QDII programme allows institutions operating in China, including banks and fund managers, to raise domestic money for offshore investment, within allowable quotas.
Standard Chartered in China has a QDII quota of around $2bn, according to data from the country’s State Administration of Foreign Exchange.
According to the bank’s website, it distributes a total of 26 Blackrock funds onshore.
In total, the bank distributes at least 200 QDII funds, which are managed by 10 foreign fund managers, according to a Shanghai-based Standard Chartered spokesman.
He noted that Standard Chartered is the exclusive distributor of the new fund in China for six months.
Blackrock funds are also distributed by other banks operating in the mainland via their QDII quotas, which include HSBC and Citibank, according to their websites.
Separately, Blackrock’s wholly-owned foreign enterprise (WFOE) in China has launched three private fund management (PFM) products and two qualified domestic limited partnership (QDLP) funds to Chinese investors.
A PFM licence allows foreign managers to offer onshore funds to domestic qualified investors, while the QDLP licence allows foreign managers to raise money domestically to invest in offshore traditional and alternative investments, within allocated quotas.
Upbeat on offshore bonds
The bank claims that Blackrock’s China US Dollar Bond Fund will be the first offshore Chinese bond product offering under the QDII programme, according to the statement.
The Hong Kong-domiciled product was rolled out in the SAR in August.
The Standard Chartered spokesman said that the bank chose to distribute the fund because of a positive in-house view on offshore Chinese bonds.
“[We are positive] on Asia US dollar bonds — among which around half of them are China corporate bonds — because of their high credit quality, with 75% of them being investment grade, low volatility and improving fundamentals,” he said.
He added that offshore fixed income has become a popular asset class among Chinese investors, especially Chinese US dollar bonds whose issuers are well-known Chinese companies.
Of the different QDII categories, global bond funds have become the most popular, attracting around RMB 3.5bn ($500m) in net inflows from Chinese investors during the first half this year, according to data from Morningstar Direct.
Separately, CCB Principal Asset Management, the joint venture firm between Principal and China Construction Bank, launched last month the CCB Principal FTSE 100 Index QDII Fund, which is the first public offering fund that invests in the UK.