AllianceBernstein has taken a big step forward by launching a UCITS fund that invests in RMB bonds issued outside of China, and other Asian bonds excluding Japan.
AllianceBernstein has taken a big step forward by launching a UCITS fund that invests in RMB bonds issued outside of China, and other Asian bonds excluding Japan. The aim of the investment approach for the AllianceBernstein RMB Income Plus Portfolio fund – a Lux-domiciled UCITS – is to combine the expected benefits of RMB appreciation with higher Asian yields. Hong Kong in particular is beginning to see its offshore RMB market grow and received a strong endorsement in January this year when the World Bank issued a RMB500million 2-year fixed rate note with a 0.95 per cent semi-annual coupon. Known as “dim sum” bonds, their combined value in Hong Kong as of end-2010 was over RMB300billion. Given that the yields on RMB bonds still tend to be quite low, comparatively speaking, the new fund will also invest in bonds from other Asian issuers.
Around 50 per cent of the fund will invest in investment-grade securities. Hayden Briscoe is portfolio manager and speaking about the new fund he said that since 2005, when it ceased being pegged to the US dollar, it had appreciated by about 20 per cent. “With China’s growth rate this year expected to be about 9 per cent we think there is scope for the renminbi to strengthen further,” commented Briscoe, adding: “The portfolio is constructed with exposure to Asian bonds to seek higher income and enhance total return, which investors are likely to value in the current low interest-rate environment. This will also provide enhanced diversification for investors, while the portfolio can flexibly rotate into the offshore renminbi new-issue market when yields become attractive.”
