UBS Asset Management (UBS AM) launched its first onshore RMB Luxembourg Ucits fund, giving high-net-worth investors direct access to the world's third largest bond market - China.
The new fund – UBS (Lux) Bond SICAV China Fixed Income (RMB) – is UBS' first Luxembourg-domiciled Ucits fund that applies a base currency in the onshore Renminbi (CNY).
A company spokesperson told Citywire Asia that the new fund is registered for sale to accredited investors in Singapore.
It will mainly invest in onshore CNY-denominated fixed income instruments, with net asset value (NAV) calculated in CNY instead of offshore Renminbi (CNH). This will help investors to avoid the NAV volatility caused by discrepancies in CNY/CNH rates.
The new fund allows also global investors to have direct access to the China Interbank Bond market (CIBM) via a Luxembourg-domiciled Ucits fund that uses CNY as the base currency.
Ashley Perrott, who is the head of Pan Asia fixed income at UBS AM, is the lead portfolio manager for the new fund.
Perrott said the fund opens up new opportunities for global investors as it gives them direct access to China's bond market, which is the world's third largest.
In addition, the Renminbi has a proven track record of lower volatility than other major currencies.
Perrott said Chinese bonds offer very attractive nominal and real yields relative to developed market yields, making the China bond market a ‘compelling’ investment opportunity.
‘This market will continue to attract investors' attention as more global indices start to include China in their benchmarks,’ he added.
UBS AM launched its first onshore equity fund for local Chinese investors in November 2017.