J.P. Morgan Chase offshoot JF Asset Management today launches its JF China Pioneer A-Share Fund. Managed from Hong Kong, the fund will be the first permitted to invest directly in China Class A Shares, according to the Wall Street Journal. The initial public offering will continue until June 30.
China's Qualified Foreign Institutional Investor program requires funds to have at least US$150 million, and Chinese regulations demand that at least 70% of the new fund be invested in yuan-denominated Class A shares.
The remainder will be invested in Class H shares, which represent companies based in China and listed on the Hong Kong exchange, Yuan-denominated treasury bonds, cash and other fixed income vehicles.
JF Asset Management Greater China team leader Howard Wang said that the fund will own stocks never before available to individual investors, and that mainland defense and consumer-oriented companies will probably account for between 60% and 80% of the portfolio. Wang declined to name specific stocks.
The fund will charge a subscription fee of 5% of the initial investment. During the first three months, the fund managers will also levy a 5% administration fee, while the annual management fee will be between 1.75% and 2.5%.
To date this year, China has been the strongest-performing exchange in its region, and has remained relatively stable in an environment of global market volatility, rising U.S. interest rates and concerns about inflation.
While the Shenzhen Class A index is up about 42% year-to-date, and the Shanghai Class A index is up roughly 32%, Wang suggested Chinese market are still undervalued and are likely to continue to rise.
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