Commerzbank Corporates & Markets has launched a Chinese equity fund through a joint venture with the Beijing-based China Asset Management.
Managed by Michael Wen and Edward Wang, the Commerzbank China Volatility fund is a Ucits compliant Luxembourg Sicav, and invests in 30-60 Chinese companies using an all capitalisation investment strategy.
The fund uses a mechanism to ensure the realised volatility within the portfolio is close to 20 per cent to provide a better risk-adjusted return. To achieve this Commerzbank and ChinaAMC will measure weekly the realised volatility of the fund. If it is above the 20 per cent target, Commerzbank will take a short future position in the Hang Seng and Hang Seng China Enterprises indices. If the volatility is below the 20 per cent target, Commerzbank will enact a long position in the index.
“ChinaAMC are providing the alpha and Commerzbank the beta control,” says Steve Muzzlewhite, a member of the institutional fund solutions team.
He says: “We did extensive analysis to come up with the 20 per cent optimised target. Therefore, as an example, if the volatility of the portfolio was under 20 per cent, in addition to the actively managed portfolio there would also be a long position in the HSCEI of HSI Future.”
ChinaAMC was one of China’s first asset management groups and has £29 billion of assets under management, 95 per cent of which are China related.
The fund will mainly be invested in H-shares, although Muzzlewhite says it may later invest in A shares. The fund’s retail share class has a minimum investment of £1,000, a 5 per cent initial fee and a 1.75 per cent annual management charge.
Skerritt Consultants head of investments Andrew Merricks says: “We can’t ignore China as an investment as it has such an influence and implications for the market globally. It will always be volatile but the authorities seem to be managing regulation well in recent times.”