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Commerzbank sets up China volatility fund

Commerzbank Corporates & Markets has launched a Chinese equity fund through a joint venture with Beijing-based China Asset Management.

The Commerzbank China volatility fund is a Ucits-compliant Luxemburg Sicav managed by Michael Wen and Edward Wang. It invests in 30 to 60 Chinese companies using an all-capitalisation investment strategy.

The fund uses a mechanism to ensure the realised volatility within the port-folio is close to 20 per cent to provide a better risk-adjusted return.

Commerzbank and ChinaAMC will measure the realised volatility of the fund weekly. 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 take a long position in the index.

Institutional fund solutions team member Steve Muzzlewhite says: “ChinaAMC are providing the alpha and Commerzbank the beta control. We did extensive analysis to come up with the 20 per cent optimised target.”

ChinaAMC was one of China’s first asset management groups and has £29bn 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.

Minimum investment in the fund’s retail share class is £1,000, initial fee is 5 per cent and annual management charge is 1.75 per cent.

Skerritt Consultants head of investments Andrew Merricks says: “We cannot 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.”

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