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AXA IM launches China fund

21 September 2017

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AXA Investment Managers (AXA IM) has launched the AXA World Funds China Short Duration Bonds fund, giving investors exposure to the 56 trillion (€7 trillion) renminbi (RMB) bond market.

The fund is the latest in the AXA IM short duration range, which is made up from 10 strategies with assets under management worth €25 billion globally.

China's fast-growing economy provides significant investment opportunities, and AXA IM said it wants to provide its clients with access to its bond market.

Jim Veneau, head of fixed income Asia at AXA IM, said China has risen to become a major power in the global financial market and they believe its accelerating financial integration presents significant investment opportunities.

He said: "From a risk-reward perspective we believe the Chinese bond market is attractive, despite the inherent risks, as recent global monetary accommodation has left most global rates at historically low levels."

Since 1978, China's GDP growth has averaged nearly 10% a year, which is the fastest sustained expansion by a major economy in history.

"We want to give our clients exposure to this rapidly accelerating bond market, currently the third largest in the world, and the significant opportunities it has to offer," said Veneau.

"At the same time, we appreciate the need to mitigate risk in today's environment and our approach seeks to provide attractive returns, while keeping duration short and managing volatility through the market cycle."

The lead fund manager, Honyu Fung, aims to limit the duration of holdings to less than three years to deliver a compelling risk-return profiles; AXA said a shorter portfolio duration mitigates volatility from changes in the market level of interest rates.

Shorter duration also mitigates credit risk with greater visibility into an issuer's cash flow sources and needs - this allows the manager to build higher conviction and higher yielding positions while mitigating the impact of inflation and interest rate risk through diversification.

"The team running this fund is based in both Hong Kong and Shanghai with our joint venture partner, AXA SPDB Investment Managers," Veneau said.

"We believe the complementary capabilities of both will allow the fund to effectively capitalise on market developments in both offshore and onshore Chinese bonds and actively capture cross-border arbitrage opportunities in the onshore (CNY) reminbi, the offshore (CNH) renminbi and the hard currency Chinese credit markets."

First published 21.09.2017