- China Asset Management (Hong Kong) has launched new tokenized money market funds in U.S. dollars and Chinese yuan, expanding its digital asset offerings for investors.
- The new yuan fund is the first of its kind to be tokenized in the Chinese currency.
- Funds are available to retail investors with flexible minimum investment options and are distributed through both traditional brokers and cryptocurrency exchanges.
- Subscription and redemption fees are relatively high, potentially reducing investor returns, especially for early withdrawals.
- The funds offer complex structures with multiple share classes and fee levels, which may complicate choices for investors.
China Asset Management (Hong Kong) has introduced two tokenized money market funds with investments available in U.S. dollars and Chinese yuan. The launch follows its initial tokenized fund denominated in Hong Kong dollars released in February and marks the first time a tokenized money market fund is offered in yuan.
According to the company, the funds are managed by ChinaAMC HK, a subsidiary of a mainland asset manager overseeing $386 billion in assets and majority owned by state-backed CITIC Securities. The firm has partnered with Standard Chartered as the custodian, while its digital platform development is managed through Libeara, a subsidiary of Standard Chartered.
While the funds use blockchain-based tokenization to record ownership, they do not permit direct peer-to-peer transfers or trading in secondary markets. “We believe that such products, when combined with stablecoins and the digital yuan, will promote financial innovation and support the internationalization of the yuan,” said Matthew Chan, Head of Product and Investment Solutions at CITIC Securities Brokerage (Hong Kong).
The distribution strategy provides access to retail investors with very low or no minimum investments for select share classes. ChinaAMC HK is making the funds available through cryptocurrency trading platforms and traditional brokerage and banking channels. Distribution partners include OSL Digital Securities, Futu Securities International, CITIC Securities (Hong Kong), Solomon, Guotai Junan Securities, and Finloop. This aims to widen market reach while maintaining regulatory compliance.
Investors using broker channels may face significant costs. Subscription fees may reach 3%, with redemption fees up to 1%. Documents show some redemption fees could go as high as 5%. Investors who withdraw within the first year may experience negative returns, even at the lower end of the fee scale. In contrast, similar offerings like the Franklin Templeton FOBXX in the United States do not charge these fees. The Hong Kong model also introduces extra counterparty risk, as brokers hold the fund shares on behalf of end investors.
Broker distribution is intended to protect retail investors by monitoring underlying investments. For instance, up to 30% of holdings in the U.S. dollar version of these funds may be in non-dollar assets, including a similar proportion allocated to mainland China investments. This is different from fully dollar-backed funds typically expected by U.S. investors.
Each fund has four share classes, creating up to 20 different investment options when factoring in three supported currencies and hedge choices. Annual management fees range from 0.05% for high-minimum investments (about $1,400 for yuan, $1,000 for U.S. dollars) to 0.6% for shares requiring no minimum investment. Class A requires a minimum of about $1.40 or $1, Class B requires approximately $0.14 or $0.10, and Class F has no minimum. The complexity may challenge new investors, although the use of digital asset exchanges could help facilitate very small, automated investments.
For more details, visit China Asset Management (Hong Kong).
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