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First ETF under VCC structure launched

The Edge Singapore
The Edge Singapore  • 3 min read
First ETF under VCC structure launched
CSOP Asset Management launches Chinese bond ETF as a sub-fund under a VCC structure
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CSOP Asset Management, an offshore asset manager set up by a regulated asset management company in China launched the CSOP Investment VCC - ICBC CSOP FTSE Chinese Government Bond Index ETF on Sept 9, 2020. The ETF offers investors access to RMB-denominated fixed rate book entry government bonds issued in mainland China in affordable units. The ETF aims to replicate the performance of the FTSE China Government Bond Index.

A VCC or variable capital company is for investment funds that can be used across a wide range of fund strategies, and as an open-ended or a closed-end fund. A VCC may be set up as a single fund structure or an umbrella fund that consists of, or is to consist of, two or more sub-funds (i.e. an umbrella VCC).

The VCC can also be used for all types of collective investment schemes in Singapore, be it closed-end funds (typically venture capital funds and private equity funds) or open-ended funds (typically mutual funds and hedge funds), and a VCC can be structured either as a single standalone fund or an umbrella fund.

VCCs require fund administrators, and HSBC is the custodian and fund administrator of CSOP Investment VCC - ICBC CSOP FTSE Chinese Government Bond Index ETF.

“We are delighted to partner with CSOP and provide our leading securities services offering for the first ETF under the authorised VCC in the country,” said Gavin Powell, Head of Global Markets, HSBC Singapore. “New fund structures like VCC now available in Asia Pacific are putting the spotlight on the region as a viable international investment hub. This strengthens our commitment to the development of the region’s fund management industry,” he added.

Technically, the ICBC CSOP FTSE Chinese Government Bond Index ETF is a sub-fund of the CSOP Investments VCC. The sub-fund will invest in the China Inter-Bank Bond Market via the Foreign Access Regime.

The ETF currently intends to declare semi-annual distributions to shareholders in June and December of each year. Distributions will be made in US$.

The IPO of the ETF closed on Sept 16. The Issue Price of each share was US$10.00 or its equivalent amount expressed in RMB. The minimum holding and redemption amount is 50,000 shares.

The fund has an initial assets under management of US$676 million and CSOP expects the amount to exceed US$1 billion "very quickly". It is rated A+ and has a yield of around 3%. Additional funds are in the pipeline as well.

“Global fixed income investors have been turning to Chinese sovereign bonds for added diversification and yields, and this product is a strong addition to our platform,” says SGX CEO Loh Boon Chye at a media briefing on Sept 17.

“We believe this China-themed fixed income ETF with relatively low cost, easy access and diversified bond holdings will suit the local investors’ demand of seeking for a relatively stable yield,” says CSOP CEO Ding Chen at the same briefing.

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