Aberdeen Standard Investments has launched a Luxembourg-domiciled China onshore bond fund targeting international investors.
The Aberdeen Global - China Onshore Bond fund will primarily invest in liquid government securities and highly rated or high quality policy bank, quasi sovereign and investment grade corporate bonds in the mainland Chinese bond market that are issued in onshore Renminbi (CNY).
The company’s spokesperson told Citywire Asia that this is Aberdeen Standard’s first China bond fund that’s dedicated to investing in the country’s onshore bond market.
Nevertheless, Aberdeen Standard has been investing in the Chinese bond market for many years for its regional fixed income portfolios.
The new fund, which will be available for professional investors in Asia, will initially be registered for sale in Luxembourg and Italy, with the intention of further registration in Belgium, Denmark, France, Germany, Netherlands, Spain, and Switzerland, the spokesperson said.
The fund is managed by Aberdeen Standard’s 20-member Asian fixed income team, which forms an integral part of the wider emerging market debt team.
The fund’s primary strategy is to deploy interest rate duration or curve with some credit strategies.
Demand for Chinese bonds
Craig Macdonald, global head of fixed income at Aberdeen Standard, said the demand for Chinese bonds will increase significantly when Chinese bonds are included in broader market indices.
There is already demand for Chinese bonds from global investors because of the relatively attractive yield and low correlation of the market to global peers, he said.
Given the relatively low co-relation of the Chinese bond market to other bond markets globally, investing in the China market looks particularly attractive in a rising interest rate environment in other major markets.
Citing data from Bloomberg, Aberdeen Standard said local currency Chinese bonds have continued to deliver positive returns despite recent volatility in emerging markets and have been one of the top performing global bond markets over the last year.
Another new fund in the pipeline
Meanwhile, Aberdeen Standard also has plans to launch a similar bond fund for eligible domestic Chinese investors later this year, according to Hugh Young, the company’s head of Asia Pacific.
Last month, Aberdeen Standard launched its first onshore private fund in China in May and successfully completed its initial fund offering to eligible domestic investors.
Aberdeen Standard’s wholly foreign-owned enterprise, Aberdeen Standard Asset Management (Shanghai) was registered as a private securities investment fund manager with the Asset Management Association of China at end-2017.
In addition to its asset management business in China, Standard Life Aberdeen has had a 50/50 joint venture insurance business, Heng An Standard Life since 2003.