Stratton Street Capital and Universal Investment have launched a Ucits fund allocating to investment grade Asian bonds and using currency hedges to gain renminbi exposure.
Andrew Seaman, fund manager of the Stratton Street Ucits Renminbi Bond Fund UI says he buys from creditors that can sustain their debts and pay back their debt.
In contrast, index-based bond funds buy more from the most indebted, he adds.
This investment process, Seaman says, has driven the company to focus largely on investing in the high growth creditor nations of Asia, including China.
“These countries have enough overseas assets to pay back their foreign debts and they are borrowing to invest in their long term growth,” he says. “Over the long term these net foreign asset positions are associated with currency appreciation, which is why Stratton Street is positive about the long term appreciation prospects for the renminbi.”
Stratton Street’s base assumption is that the currency will double in value over the next decade.
The Luxembourg-domiciled fund has euro, sterling and Swiss franc share classes, leaving only exposure to the appreciation of the renminbi against the dollar. A dollar class is also available, as well as a offshore renminbi class for investors who wish to use the fund to get a higher yield than renminbi deposits.
Stratton Street Capital is a London-based fixed income manager while Universal Investment is an independent investment company based in Frankfurt.
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