Guinness China RMB Income Fund

The Guinness China RMB Income Fund aims to provide investors with a combination of capital appreciation and income. The Fund invests in a range of bonds and fixed income investments which will be denominated or hedged back to Renminbi (Renminbi or RMB being the official currency of China).  The Fund buys government and quasi-sovereign bonds in the onshore China bond market and supranational and high-grade corporate credit in the offshore bond market. The Fund is a high conviction strategy with 30-60 positions and is targeting a duration of three years or less and a yield of c3%*.

One of the reasons for launching the Fund is that we believe the Renminbi is undervalued in ‘Purchasing Power Parity’ terms both on absolute measures but also relative to the country’s net foreign assets. We believe that long term currency appreciation of Renminbi against its trade-weighted basket is expected to be the 1.5% - 2.5% p/a range over the next ten years.**. There are a number of reasons why we believe the Renminbi will appreciate over the next few decades:

• The People’s Bank of China is closer to being the ‘Bundesbank of Asia’ than the majority of western central banks, with the former adopting more orthodox monetary policy.
• The US Dollar is the world’s reserve currency and will remain so for many years – but US fundamentals have been deteriorating.
• China’s Current account is growing . In part this is due to the excessive stimulus in the West but China’s lower inflation rate aids competitiveness.
• Investor reallocation. China is opening up its asset management and bond markets to allow foreigners access to what is set to become the world’s second biggest capital market.

Guinness Global Investors is the Investment manager of the fund.  EPIC investment Partners is the sub-investment manager, managing the portfolio on a day-to-day basis.

*The target yield is based on current prevailing yields on bonds of equivalent credit rating and maturity
** These represent our best estimated of long-term returns: they are subject to change and are not guaranteed