Allianz Global Investors plans renminbi fund for European investors

Allianz Global Investors is to become one of the first German asset managers to launch a renminbi fixed income fund, to give European investors access to what it expects to be an increasing stream of yuan-denominated bonds.

The Ucits fund, called Allianz RCM Renminbi Fixed Income fund, will launch later this month, targeting investment returns above yuan deposit rates over the long-term, by investing in “high quality issuers”.

It is believed some of AGI’s largest domestic investors are also readying renminbi-focused fund products.

AGI’s will invest chiefly in RMB deposits and a diversified portfolio of investment instruments including RMB-denominated sovereigns, corporate, supra-national and quasi-government bonds, yuan deposits and certificates of deposit. It may also invest in convertible bonds to enhance the yield.

The Luxembourg domiciled fund is a response to European client demand, the group said in a statement.

Most of its assets will be held in yuan deposits through inception, with initial yields of approximately 1% to 1.5%, to maintain Ucits compliance.

The group added the fund would seek a total return, inclusive of currency appreciation, in excess of 5% per annum over the longer-term.

Raymond Chan, CIO Asia Pacific at RCM, a unit within AGI, added: “While at present the use of the renminbi outside of China is limited, demand is very strong and we have seen the volume of renminbi deposits held offshore in Hong Kong rise by over 500% in the past 12 months.

“The renminbi bond issues by Caterpillar and McDonald’s last year were both oversubscribed and the supply of renminbi bonds in Hong Kong is much less than demand, despite the expansion in the renminbi bond universe.”

RCM has 26 years’ experience in Asia Pacific, and 38 investment professionals there running more than $14bn in regional and single country funds.

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