Schroders is taking advantage of recent regulatory changes in China, which has opened up the onshore bond market to eligible foreign investors, Citywire Asia's sister website Citywire Selector has learned.
The 14.5 billion Hong Kong dollar (€1.76 billion) Schroder ISF Hong Kong Dollar Bond fund can now invest directly in onshore bonds through the China Interbank Bond Market Initiative, according to a letter to shareholders seen by Citywire Selector.
The fund is managed by Citywire A-rated Chow Yang Ang, who has run the fund since May 2007. A spokesperson for the asset manager confirmed there were no further changes to the investment process.
Under the changes, the fund cannot invest more than 5% of the net asset value in asset-backed securities, which includes mortgage-backed securities, and cannot invest in structured deposits or structured products.
There are no restrictions on the minimum credit ratings of debt securities the fund can invest in the China Interbank Bond Market Initiative.
The spokesperson confirmed that the changes due to the China Interbank Bond Market Initiative extended to the Schroder ISF RMB Fixed Income fund, managed by Rajeev De Mello and Angus Hui, and the Schroder ISF Asian Local Currency Bond fund.
‘The fund may invest in China to achieve its investment objective through the China Interbank Bond Market Initiative. It is intended that the exposure of the Fund to China onshore investment through the China Interbank Bond Market Initiative will be less than 30% of the net asset value,’ the letter to shareholders said.
Over three years to the end of March 2017, the Schroders ISF Hong Kong Dollar Bond fund returned 3.91% in Hong Kong dollar terms. This compares to a rise of 6.27% by its Citywire-assigned benchmark the Markit iBoxx ABF Hong Kong TR, over the same time frame.