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 UCITS can invest 100 percent of its net assets in China A-shares (ie, shares in mainland China-based companies that are traded on a Chinese stock exchange). It 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 is an 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,” said a statement from ALFI, an association for the Luxembourg fund industry.
The subsequent use of the RQFII quota is still subject to authorisation of the
China Securities Regulatory Commission (CSRC).
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