BEA Union Investment Management Limited (BEA Union Investment) announced on October 17 the launched of BEA Union Investment Asian Corporate Target Maturity Fund 2023 (the Fund).
Central banks worldwide have restarted monetary easing, marking a prolonged low interest rate environment globally. It is a tough time for income investors to find a decent return under current market conditions.
Since BEA Union Investment launched the first SFC-authorized fixed maturity bond fund for Hong Kong retail investors in January 2019, the demand for fixed maturity products with stable stream of income has been increasing.
The Fund is an Asian corporate bond fund designed to provide investors with regular monthly income via 41 monthly dividends (dividend is not guaranteed and distributions may be paid out of income and or capital) during its tenure over the course of approximately 3.5 years, with a target maturity date of May 23 2023, and seeks to return capital at maturity.
This Fund is only available for subscription from October 21 to November 5. The base currency is US dollar and it also offers different currencies share classes including US dollar, HK dollar and renminbi (Hedged). The minimum investment amount is US$10,000 for the US dollar class, HK$100,000 for the HK dollar class, or the equivalent of US$10,000 for the renminbi (Hedged) class. The Fund’s investment is diversified across a number of high-quality Asian corporate bonds.
Pheona Tsang, chief investment officer of Fixed Income at BEA Union Investment, says, “Global monetary policies will remain accommodative and bond yields will stay low for a prolong period of time. Investors will continue to look for yield enhancing investment strategy. Being one of the world’s highest yielding asset classes, Asian corporate bonds offer attractive investment opportunities.”
“We believe that a fixed term maturity strategy on high quality Asian corporate bonds helps investors to capture the current wide credit spreads triggered by the macro headwinds and to lock in an attractive total yield,” she adds.
Fixed maturity bond funds combine the benefits of a traditional bond fund with a fixed maturity date. Compared to direct investment in a few bonds by individual investors, a fixed-maturity bond fund brings in benefits of diversification with a large pool of bond positions across different markets and industries.
Investors are expected to receive the targeted periodic income from bond coupons regardless of the fluctuated bond prices, and being repaid their share of its net asset value when the fund matures. It gives more certainty in terms of future cash flows and interest rate risk.
“This genre of funds has been gaining traction in the territory. Based on our estimation, the total AUM raised by fixed maturity bond funds in the retail market in Hong Kong is over US$1.5 billion year-to-date. The demand from private banking clients is even more overwhelming. We expect this product trend will continue going forward,” says Rex Lo, managing director of Business Development at BEA Union Investment.
The Fund leverages the experience and insights of BEA Union Investment fixed income experts to pick quality assets that can meet investors' regular income needs. It will use a buy-and-monitor strategy portfolio to help investors capture current yield levels of the underlying bonds with active risk monitoring. It aims to capture stable return and the portfolio is managed with active credit selection and continuous monitoring of credit developments to avoid potential credit risk.