The Sub-Fund’s objective is to invest in short-term deposits and high quality money market instruments. The Sub-Fund seeks to achieve a return in US Dollars in line with prevailing money market rates, with primary considerations of both capital security and liquidity. There can be no assurance that the Sub-Fund will achieve its investment objective.
Indicative asset allocation
The indicative asset allocation of the Sub-Fund is as follows:
70% - 100% of the Net Asset Value of the Sub-Fund (“NAV”)
US Dollars-denominated and settled short-term deposits and high quality money market instruments
0 – 30% of the NAV
Non-US Dollars-denominated and settled shortterm deposits and high quality money market instruments
The Sub-Fund seeks to achieve its investment objective by investing primarily (i.e. not less than 70% of its NAV) in US Dollars-denominated and settled short-term deposits and high quality money market instruments issued by governments, quasi-governments, international organisations, financial institutions. The Sub-Fund may invest up to 30% of its NAV in non-US Dollars-denominated deposits and high quality money market instruments. High quality money market instruments include debt securities, commercial papers, certificates of deposits and commercial bills. Debt securities invested by the Sub-Fund include but are not limited to government bonds, fixed and floating rate bonds.
The Sub-Fund will only invest in debt securities rated investment grade or above (or where such instruments have no credit rating, the credit rating of their issuer or guarantor should be investment grade or above) with short or short remaining maturity. For the purposes of the Sub-Fund, investment grade is defined as below:
Short-term debt securities are considered investment grade if their credit ratings or the credit ratings of their issuers or guarantors are rated A-3 or higher by Standard & Poor’s or F3 or higher by Fitch Ratings or P-3 or higher by Moody’s or equivalent rating as rated by one of the international credit rating agencies, or onshore China bonds with a minimum credit rating of A-1 as rated by one of the credit rating agencies in China. For split credit ratings, the highest rating shall apply.
While the Sub-Fund does not intend to invest in debt securities with a long term to maturity remaining at the time of investment, the long-term credit ratings will be considered where the Sub-Fund invests in debt securities which have been rated long-term credit ratings, but have a shorter term to maturity remaining (subject to the requirements on remaining maturity, weighted average maturity and weighted average life of the portfolio of the Sub-Fund as set out below). For such instruments, investment grade means Baa3 / BBB- or above by an internationally recognised credit rating agency (such as Standard & Poor’s, Fitch’s and Moody’s) or rated AA+ or above by a Mainland China credit rating agency. For split credit ratings, the highest rating shall apply.
The short-term deposits (e.g. certificates of deposits) invested by the Sub-Fund will be issued by investment grade-rated banks or substantial financial institutions. A “substantial financial institution” means an authorised institution as defined in the Banking Ordinance or financial institution with a minimum paid-up capital of HKD150,000,000 or its equivalent in foreign currency.
For investment grade (either the security or its issuer or guarantor) debt securities, the Manager will assess the credit risks of the debt securities on an ongoing basis based on quantitative and qualitative fundamentals, including but not limited to the issuer’s leverage, operating margin, return on capital, interest coverage, operating cash flows, industry outlook, the firm’s competitive position and corporate governance etc. to ensure that the debt securities that the Sub-Fund invests in are of high credit quality.
The Manager will assess the liquidity profile of the debt securities based on, amongst other factors, time to cash, external liquidity classification, liquidation horizon, daily trading volume, price volatility and bid-ask spread of such securities. Only securities with sufficient liquidity will be included in the portfolio of the Sub-Fund.
There is no specific geographical allocation of the country of issue of the high quality money market instruments or deposits, except that the Sub-Fund may not invest more than 20% of its NAV in emerging markets (including in onshore China markets). Countries or regions in which the Sub-Fund may invest in include, but are not limited to, Hong Kong, Singapore, the European Union, the United States and China (onshore and offshore markets). The Sub-Fund may invest in onshore China debt securities via the mutual bond market access between Hong Kong and Mainland China (“Bond Connect”).
The aggregate value of the Sub-Fund’s holding of instruments and deposits issued by a single entity will not exceed 10% of the total NAV of the Sub-Fund except: (i) where the entity is a substantial financial institution and the total amount does not exceed 10% of the entity’s share capital and nondistributable capital reserves, the limit may be increased to 25%; or (ii) in the case of Government and other public securities (as defined in the Explanatory Memorandum), up to 30% may be invested in the same issue; or (iii) in respect of any deposit of less than USD1,000,000, where the Sub-Fund cannot otherwise diversify as a result of its size.
The Sub-Fund will maintain a portfolio with weighted average maturity not exceeding 60 days and a weighted average life not exceeding 120 days and must not purchase an instrument with a remaining maturity of more than 397 days, or two years in the case of Government and other public securities.
The Sub-Fund may borrow up to 10% of its total NAV but only on a temporary basis for the purpose of meeting redemption requests or defraying operating expenses.
The Sub-Fund may enter into sale and repurchase transactions for up to 10% of its NAV but only on a temporary basis for the purpose of meeting redemption requests or defraying operating expenses. The Sub-Fund will not write any options. The Sub-Fund will enter into other financial derivative instruments (“FDIs”) for hedging of the non-US dollars denominated securities and settled short-term deposits and high quality money market instruments purposes only.
The Sub-Fund currently has no intention to invest in structured deposits, structured products or overthe-counter securities, or to take any short positions, and the Manager will not enter into any securities lending, reverse repurchase or other similar over-the-counter transactions in respect of the Sub-Fund. The Sub-Fund will not invest in collateralised and/or securitised securities (including asset backed commercial papers and mortgage backed securities). The Sub-Fund will not invest in any convertible bonds or instruments with loss absorption features. If any of this changes in the future, prior approval of the SFC will be sought (if required) and not less than one month’s notice will be provided to Unitholders before the Sub-Fund enters into any such transaction.
Use of derivatives / investment in derivatives
The Sub-Fund’s net derivative exposure may be up to 50% of the Sub-Fund’s latest available NAV.
Management Fee (p.a.)
* (% Net Asset Value of the Sub-Fund per annum)
*Please note that these fees may be increased up to a permitted maximum on giving 1 month’s notice to unitholders. Please refer to the section of the prospectus entitled “Fees and Expenses” for further details of the fees and charges payable.