Schroder China Asset Income Fund
Why Invest in the Schroder China Asset Income Fund?
Capture capital growth potential of the “New Economy” of China
China is undergoing a fast and exciting transition into its “New Economy” model which focuses on industries such as consumption, business services, information technology, science and research and social media, to name but a few.
For example in consumption, the upper-middle-class population is expected to continue growing at an annual rate of 17% until 2020*, which could potentially lead to US$ 1.5 trillion* of incremental spending in urban China. In addition, the average age of high income earners is trending younger, resulting in a change in consumer behaviour that may potentially benefit e-commerce and social media companies.
Overall, the service sector now accounts for more than half of the Chinese economy, and is likely to continue growing at a rapid pace. By covering attractive investment opportunities in the “New Economy”, our strategy allows investors to capture the growth potential in China.
* Source: Boston Consulting Group, The New China Playbook, December 2015.
A comprehensive approach to investing in China
A broad spectrum of investment opportunities exists in the Chinese equity market. In addition to A and B shares in Shanghai and Shenzhen as well as H-shares listed in Hong Kong, US listed American Depository Receipt (ADR) of Chinese corporations also present investors with many interesting opportunities. In fact, there are more “New Economy” stocks listed in the US and in Shenzhen than in Shanghai and Hong Kong.
In fixed income, yields from China’s onshore and offshore bonds can potentially diverge substantially given different market dynamics. Currently, yields are higher in the offshore market#, but yields of onshore bonds were more attractive in 2014, creating an opportunity for active allocation. In addition, recent developments in the Chinese interbank bond market (CIBM) have lifted quota restrictions on foreign institutional investors. This, combined with increasing interest from foreign corporations to issue onshore Panda bonds, will bring more interesting opportunities to the China fixed income market.
Given the rapid market development, our comprehensive multi asset approach can help our investors cover a broad investment spectrum to capture growth and income opportunities related to China.
# Source: Schroders. As of 29/07/2016.
Active asset allocation with risk management
The fund’s active asset allocation between Chinese equities (30-70%), Chinese bonds (30-70%), other asset classes (0-20%) and Cash (0-30%)~ aims to capture growth and income opportunities in China. We will also actively manage the exposures to onshore equities and fixed income to take advantage of the growth potential of onshore assets. In addition, risk management on currency and interest rates is implemented from time to time with the aim to reduce potential losses during difficult markets.
~The exact asset allocation may deviate from the range mentioned above without prior notice to investors, please refer to the relevant offering document for details.
Regular monthly payout (Distribution rate is not guaranteed, and payment of distributions could be paid out from capital)^
With zero or even negative interest rates, income on assets will continue to be one of the important components of investors’ returns. The fund offers investors a regular monthly payout, backed by a sustainable stream of income mainly from the fixed income portfolio, and to a lesser extent from the equities in the fund.
The Fund is managed by Schroders’ three top-class investment teams, namely the Multi- Asset team, the Asian equity team, and the Asian fixed income team. With proven tracking records in Asian markets and awards earned from Lipper Fund Awards and SCMP Fund Awards, these teams are well-positioned to capture the capital gain and income opportunities in China markets.
^In respect of the distribution units, the manager will declare and pay monthly distributions. However, the distribution rate is not guaranteed. Distribution yield is not indicative of the return of the fund. Distributions may be paid from capital of the fund. Investors should note that where the payment of distributions are paid out of capital, this represents and amounts to a return or withdrawal of part of the amount you originally invested or capital gains attributable to that and may result in an immediate decrease in the value of units.
Source: Schroders. Investment involves risks. Please refer to the relevant offering documents for fund details including risk factors. This material is issued by Schroder Investment Management (Hong Kong) Limited and has not been revised by the SFC.