Schroders launches China-focused Multi-asset Income Fund in Hong Kong

08-25-2016
Hong-Kong-street-2016

Important Information
The fund invests primarily in Chinese equities and fixed income securities.
1. The fund is exposed to equity investment risk. The fund’s active allocation strategy may incur greater transaction costs and there is no assurance that such strategy will be successful.
2. 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. Distribution 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.
3. The fund invests in debt securities would subject to interest rate, credit and counterparty, credit ratings, credit downgrading, liquidity and volatility, and valuation risks. Investment in below investment grade and unrated debt securities are subject to higher risks than higher rated securities.
4. The fund invests in mainland China would subject to Mainland China market, Stock Connect, concentration, political and economic, and legal and regulatory risks. China A and B Shares market may be more volatile and unstable than markets in more developed countries. Stock Connect has quota limitations and its rules are subject to change with potential retrospective effect.
5. The fund may invest into investments denominated in currencies other than the fund’s base currency and subject to currency and exchange risk. If the investor’s based currency is a different currency than the share class’s currency being invested in, the investor needs to carry out conversion and would involve conversion costs. RMB is currently not freely convertible. There is no assurance that RMB will not be subject to devaluation.
6. Hedged share class hedges the fund’s base currency back to its currency of denomination on a best efforts basis. Expenses arising from hedging transactions will be borne by the relevant hedged classes. The volatility of the hedged classes measured in the fund’s base currency may be higher than that of the equivalent class denominated in the fund’s base currency. This may preclude such investors to benefit from an increase in the value of the fund’s base currency.
7. The fund may invest in financial derivative instruments (FDI) and subject to risks associated with FDI.
You should not make any investment decision solely based on this document. Please read the relevant offering document carefully for further fund details including risk factors.

Schroder Investment Management (Hong Kong) Limited (Schroders Hong Kong), a wholly-owned subsidiary of Schroders plc, today announced the launch of the Schroder China Asset Income Fund (the Fund), a new product that aims to capture capital growth and income opportunities amid the rise of the Chinese “New Economy.”

The Fund invests primarily in onshore and offshore Chinese equities and bonds. Through active asset allocation and risk management, the Fund maximises return potential by taking a comprehensive approach to investing in China. It largely targets “New Economy” sectors such as consumption, business services, information technology, science and research, and social media, as well as selective exposure to other traditional sectors. In addition, risk management on currency and interest rates is implemented from time to time to mitigate risks through market cycles.

The Fund offers accumulation and distribution share classes, giving investors the options to reinvest the dividends or receive regular monthly payout1.

Chris Durack, Country Head of Hong Kong and Head of Institutional Business, Asia Pacific, commented:

“In today’s investment environment characterised by low growth and low interest rates, we recognise the value that investors place on generating income from their investments without sacrificing the potential for capital growth. The Fund is designed to answer to these two objectives, offering investors a regular monthly payout1, backed by a stream of income mainly from the fixed income portfolio, while capturing capital growth potential of the burgeoning ‘New Economy’ of China across multiple asset classes.”

The Fund is actively managed by the Multi-Asset Team, which also manages the very successful HK$29 billion Schroder Asia Asset Income Fund2. The Multi-Asset team is responsible for overall asset allocation and risk management, and works closely with the Asia ex Japan Equity and Asian Fixed Income teams, which are responsible for stock and bond selection, respectively.

Louisa Lo, Deputy Head of Investment – Asia ex Japan Equity, commented:

“China is undergoing an exciting transition into its ‘New Economy’ model. It is undeniable that e-commerce and social media sectors are growing rapidly. Online shopping penetration has reached 12%3, surpassing the U.S. and Japan. Meanwhile, the rate of consumption by the upper- and middle-class is expected to grow at a significant pace of 17% per annum up to 2020. Areas that would benefit from the structural shift include affordable living, education, and tourism.

“Consumption, e-commerce and technology are just a few examples of the fast-growing ‘New Economy.’ Overall, the service sector now accounts for more than half of the Chinese economy, and is likely to continue growing at a rapid pace. We look for opportunities to be engaged in these sectors, alongside selective exposure to other traditional sectors as investment merits warrant, maximizing the return potential.

“We do not limit ourselves by the location of listing. In addition to A-shares, B-shares, and H-shares, U.S.-listed American Depository Receipt (ADR) of Chinese corporations also presents interesting opportunities.”

Angus Hui, Fund Manager of Asian Fixed Income, commented:

“China’s credit market continues to offer attractive risk-adjusted returns, especially when compared to developed countries and the overall low-yield environment globally. Our diversified approach of investing in China’s USD, onshore and offshore renminbi fixed income markets, enables us to capture a wide range of opportunities, and enhance income and return potential.

“We see currently opportunities in the China USD credit market, particularly in large-size investment grade credits and select high yield bonds. Yields from China’s onshore and offshore bonds can potentially diverge substantially at different times and market dynamics, which underline the beauty of tapping both on- and offshore markets and the importance of active allocation.

“As one of the pioneering investors in Chinese fixed income, we expect China’s onshore bond market to continue its liberalisation and gradually open up to international investors. This is evident by recent developments in the Chinese interbank bond market, which 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.”

Chris Durack concludes:

“Schroders is committed to delivering sustainable solutions for investors in Hong Kong through diversifying their portfolios with innovative products that best suit their needs. With the new Schroder China Asset Income Fund, we will continue to bring dynamic investment opportunities to our clients that will help them navigate through different market cycles.”

1 Distribution rate is not guaranteed, and payment of distributions could be paid out from capital. Please refer to Important Information 2 for details.
2 Source: Schroders. As of 30 June 2016.
3 Source: Boston Consulting Group, China Internet Network Information Center (CNNIC), Cisco Visual Networking Index, December 2015.

Important information

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

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