BOC to sell high-yield bond fund in Europe 

One of China’s state-owned banks has struck a deal with Citigroup to market its first fund to pension funds and retail investors in Europe.

Bank of China Hong Kong Asset Management, which is owned by Bank of China, has moved a US$165 million high-yield bond fund to Luxembourg from the Cayman Islands and has reached a deal for the U.S. bank to distribute the fund.

The move to Luxembourg, along with a structure that complies with European investment regulations, mean that the fund can be widely sold to retail investors and pension funds.
It will mark the first time one of China’s state-owned banks has solicited retail and pension-fund investors in Europe to let them manage money.

“We definitely want to establish our brand as one of the best for China fixed-income and equities investments,” said Au King Lun, chief executive of BOCHK Asset Management.
The fund will invest in offshore renminbi high-yield bonds, but because that market isn’t liquid enough for the “very sizable” fund that Bank of China wants to create, it will also have to buy dollar bonds, using currency hedges that will deliver performance as if the bonds were denominated in the renminbi, or yuan.
It aims to deliver an 8 per cent yield to income-seeking investors in European markets by capitalizing on the growing use of the yuan by corporations that want to trade with China.

Citigroup’s role is to market the fund and future funds, which Bank of China can’t do because of its relatively small presence in Europe.
BOCHK Asset Management has US$7.7 billion in assets under management, mostly based in Hong Kong.

 

Source: theaustralian- BOC to sell high-yield bond fund in Europe

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