The Luxembourg regulator CSSF has authorised the first Renminbi Qualified Foreign Institutional Investor (RQFII) fund under the Undertakings for Collective Investment in Transferable Securities (UCITS) scheme.
The Luxembourg regulator has approved a UCITS investing 100% of its net assets in China A-shares (i.e. shares in mainland China-based companies that are traded on a Chinese stock exchange). The UCITS can invest in these shares through the use of the RQFII quota granted to its manager by the competent Chinese authorities.
In order to authorise such an ‘RQFII UCITS’, the CSSF requirements relate to the following :
- the fact that the fund must be open-ended;
- the experience, competence and qualification of the manager;
- the application of appropriate risk management procedures;
- the correspondent bank of the depository and the segregation of assets at the level of the correspondent bank of the depository.
Requirements of the UCITS directive need to be fully complied with.
Notably, since the latest expansion of the RQFII scheme in March 2013, liquidity in RQFII funds is required. These new rules correspond entirely to the UCITS regulation that also requires liquidity.
The RQFII UCITS scheme is particularly interesting for foreign fund managers using Luxembourg as their platform to distribute UCITS on a cross-border basis.
Luxembourg UCITS are a renowned investment scheme distributed in around 70 countries. Accordingly, Luxembourg is the ideal hub to domicile RQFII investment funds and to distribute them globally in order to boost the access to RMB denominated assets worldwide.
The subsequent use of the RQFII quota is still subject to authorisation of the China Securities Regulatory Commission (CSRC).
The new development coincides with the release of the new figures underlining Luxembourg’s leading position as a European RMB centre. As of June 2013, 18 asset managers have established RMB funds in Luxembourg with a total of more than 220bn RMB of assets under management. Among these international RMB fund promoters, are the most prestigious names in the industry. With 56bn RMB in deposits and over 67bn RMB in loans in Q3 2013, Luxembourg maintains its position as the financial centre with largest RMB business volumes in the Eurozone. Detailed facts & figures can be found here.