Guinness Global Investors has launched the Guinness China RMB Income Fund.
The fund is offered in partnership with fixed income specialist EPIC Investment Partners, which will manage the portfolio day-to-day.
It aims to deliver capital appreciation and income by investing in a range of bonds and fixed income instruments denominated in or hedged back into renminbi.
The managers will hold 30 to 60 assets, spread across government and quasi-sovereign bonds in the onshore China bond market, as well as supranational and high-grade corporate credit in the offshore bond market.
The firm described the strategy as high conviction, short duration, with a targeted duration of three years or less, and target yield of approximately 3%. The headline fee is 0.60%, while there is also a founder share class at 0.45%.
Guinness said one of the primary reasons for launching the fund is a belief that the renminbi is currently undervalued in purchasing power parity terms, both on absolute measures and relative to China’s net foreign assets. Over the coming decade, the currency could appreciate by an average of 1.5% to 2.5% a year against its trade-weighted basket of currencies, the firm added.
Principle drivers of this include the People’s Bank of China adopting a more orthodox monetary policy than the majority of western central banks, and the US dollar coming under pressure as fundamentals deteriorate.
Guinness also noted China’s current account is growing and the country is opening up its asset management and bond markets to allow foreigners access to what is set to become the world’s second-biggest capital market.
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