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 Hong Kong Dollars in line with prevailing money market rates in Hong Kong, 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
Hong Kong Dollars-denominated and settled short-term deposits and high quality money market instruments
0 – 30% of the Net Asset Value of the Sub-Fund
Non-Hong Kong Dollars-denominated and settled short-term 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 Net Asset Value) in Hong Kong 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 Net Asset Value in non-Hong Kong 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 Net Asset Value 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 Bond Connect (as defined below).
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 Net Asset Value 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 non-distributable capital reserves, the limit may be increased to 25%; or (ii) in the case of Government and other public securities, up to 30% may be invested in the same issue; or (iii) in respect of any deposit of less than USD1,000,000 or its equivalent in HKD, 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 Net Asset Value 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 Net Asset Value 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 FDIs for hedging of the non-Hong Kong Dollars-denominated securities and settled short-term deposits and high quality money market instruments purposes only.
For the purpose of the Sub-Fund, sale and repurchase transactions are transactions where the Sub-Fund sells securities such as bonds for cash and simultaneously agrees to repurchase the securities from the counterparty at a pre-determined future date for a pre-determined price. A sale and repurchase transaction is economically similar to secured borrowing, with the counterparty of the Sub-Fund receiving securities as collateral for the cash that it lends to the Sub-Fund. A summary of the policy in respect of the Sub-Fund’s securities financing transactions is set out in Schedule 2 of the Explanatory Memorandum.
The Sub-Fund currently has no intention to invest in structured deposits, structured products or over-the-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
The Sub-Fund’s net derivative exposure may be up to 50% of the Sub-Fund’s latest available Net Asset Value.
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.
Copyright? 2012 - 2023. E Fund Management (Hong Kong) Co., Limited.
E Fund Management (Hong Kong) Co., Limited is the issuer of this report. This report is neither an offer nor solicitation to purchase units of the fund; applications for units may only be made on forms of application available with the Explanatory Memorandum. Investments are subject to investment risks, fund value may go up as well as down and past performance is not indicative of future performance. Investors should read carefully the Explanatory Memorandum (including the section “Risk Factors”) for the relevant risks associated with the investment in the fund before investing. Distribution of this report may be restricted in certain jurisdictions. This report does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom it is unlawful to distribute such a report or make such an offer or solicitation. This report is exempted from pre-vetting and authorization by the Securities and Futures Commission of Hong Kong and has not been reviewed by the Securities and Futures Commission of Hong Kong. SFC authorization is not a recommendation or endorsement of a scheme nor does it guarantee the commercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors.