The UBS China Yufeng Bond Strategy No. 1 Private Security Investment Fund has just received approval from Asset Management Association of China to be sold to China’s qualified (institutional and professional) investors, according to the regulator’s website.
This will be the third private fund management (PFM) fund launch this year, and the sixth in total, by UBS Asset Management (Shanghai), the wholly foreign owned enterprise (WFOE) of UBS Asset Management (UBS AM). It registered its first PFM in 2017, according to the regulator’s record.
The PFM licence allows foreign fund managers to invest in a portfolio of onshore assets and permits the product’s sale to a maximum of 200 domestic qualified investors.
The new UBS fund is fixed income-focused, adding to the three fixed income products that the firm has already offered Mainland investors through its PFM license.
FSA sought more information about the fund from UBS but the firm declined to comment.
Nevertheless, UBS clearly believe China onshore fixed income markets offer investors attractive opportunities.
“From a yield perspective, China fixed income markets are some of the best in the world, and particularly Chinese government bonds which are safe from a credit perspective, have low correlation to other markets, and have the potential to offer capital appreciation if, as expected, the global economy enters a slowdown,” Hayden Briscoe, head of Asia-Pacific fixed income at UBS AM, told FSA earlier.
Moreover, the phased inclusion of 363 Chinese securities over 20 months from 1 April 2019 into the widely-tracked $54trn Bloomberg Barclays Global Aggregate Index (BBGA) could ultimately bring $2trn of foreign fund flows into China’s onshore debt market, according to Moody’s Investors Service, in an earlier report.
On the other hand, onshore corporate bond defaults have been rising this year because of refinancing pressure, greater government tolerance of defaults, sluggish manufacturing and industrial sector growth and weaker investor sentiment amid the US-China trade dispute, according to data provider Wind and Fitch Ratings.
UBS’s Shanghai WFOE has 32 staff and capital of $30.5m, according to Z-Ben Advisors. In July this year, the firm registered the first fund of private securities funds in mainland China.
UBS also holds a Qualified Domestic Limited Partner (QDLP) scheme quota in mainland China, which allows it to raise money domestically to invest in offshore traditional and alternative investments.
