The first renminbi-denominated money market exchange traded fund (ETF) that can be traded and settled in renminbi (RMB), sterling and euros outside of Asia, has launched on the London Stock Exchange (LSE). CBK CCBI RQFII Money Market UCITS ETF (CCMG) is also the first ETF domiciled in the UK.
While there are many ETFs listed on the LSE, all of these have been domiciled abroad, mostly in Ireland or Luxembourg. Up until April 2014, ETFs domiciled in the UK would have been subject to 0.5 per cent stamp duty, but this has now been abolished.
Commerzbank, China Construction Bank subsidiary CCB International Asset Management and Euroclear have collaborated to launch the ETF.
Commerzbank is providing the ETF and the market making, while Euroclear settles the currency trades. The asset allocation is actively managed by CCBI Asset Management and will vary over time based on the prevailing market conditions. There are only a handful of active ETFs listed in the UK, but the numbers are growing.
Commerzbank said it launched the ETF to enable European investors to access RMB-denominated bonds via an offshore investment vehicle, because the options for offshore RMB investment are limited. It added that, when back tested over the past five years, the People's Republic of China money markets showed average returns greater than 4 per cent a year.
Commerzbank says that London was also chosen because it is a key global financial centre and one of the largest offshore RMB trading markets.
The ETF's renminbi qualified foreign institutional investors scheme (RQFII) quota allows offshore RMB investment into and repatriation from the People's Republic of China (PRC) money markets. The ETF will invest in PRC government bonds, policy bank bonds, cash, central bank bills, commercial paper and corporate bonds with a weighted maturity of no more than six months, and an AAA long-term rating or A-1 short-term rating.
CBK CCBI RQFII Money Market UCITS ETF has a physical structure, so buys the assets it invests in rather than getting the returns via a derivative swap.
The ETF offers three share classes:
| Share class | Stock market code* |
| Share class A (RMB) | CCMR |
| Share class B (GBP) | CCMG |
| Share class C (EUR) | CCME |
Source: Commerzbank, *London Stock Exchange.
It has an all-in fee of 0.65 per cent and the minimum investment is RM100 (£10.91).
"This could be used to bet on the strength of the Renminbi, but is not a core investment - it could be a small addition to a portfolio," said Adam Laird, head of passive investments at Hargreaves Lansdown. "Even though this may be covered by the UK Financial Services Compensation Scheme (FSCS), it does not remove the risk of these investments."
