Axa Investment Managers (Axa IM) has launched a China short duration bond fund.
The fund will be managed by Honyu Fung, senior portfolio manager on Axa IM’s Asian fixed income team, and aims to give investors exposure to China’s 56 trillion renminbi (£6.47 trillion) bond market.
Fung will adopt a bottom-up approach to identify bonds with an average rating of BBB+, and will focus on coupon income and regular reinvestment opportunities.
The fund will aim to limit the duration of holdings to less than three years, which Axa said will mitigate volatility from changes in the market level of interest rates.
The firm added that shorter duration also mitigates credit risk with better visibility into an issuer’s cash flow sources and needs, which will allow Fung to build ‘higher conviction and higher yielding positions while mitigating the impact of inflation and interest rate risk through diversification.’
Commenting on the fund launch, Jim Veneau (pictured), head of fixed income Asia at Axa IM, said: ‘China has risen to become a major power in the global financial market and we believe that its accelerating financial integration presents significant investment opportunities.
‘From a risk-reward perspective we believe the Chinese bond market is attractive, despite the inherent risks, as recent global monetary accommodation has left most global rates at historically low levels.’
The Luxembourg-domiciled Sicav will be managed by Axa IM alongside its joint venture partner in Shanghai, Axa SPDB Investment Managers.
Veneau added he hopes the JV partnership will allow the fund to ‘effectively capitalise on market developments’ in both offshore and onshore Chinese bonds, and ‘actively capture cross-border arbitrage opportunities’ in the onshore (CNY) reminbi, the offshore (CNH) renminbi and the hard currency Chinese credit markets.
The fund launch comes after Axa IM launched a global short duration bond fund in May.