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Guinness Global Investors
Guinness Global Investors has launched the Guinness China RMB Income Fund, a fund that comes in a sterling share class. It aims at a mix of capital growth and income.

EPIC Investment Partners will be responsible for the daily running of the portfolio, Guinness said in a statement. 

The fund will primarily invest in bonds and fixed income instruments, which are denominated in or hedged back into renminbi. It will invest in government and quasi-sovereign bonds in the onshore China bond market, as well as supranational and high-grade corporate credit in the offshore bond market.

“We plan to implement a high conviction, short duration strategy, holding between 30 to 60 positions, with a targeted duration of three years or less, and aiming for a yield of approximately 3 per cent,” Guinness said.

Guinness said one of the main reasons for the fund is that it thinks renminbi, aka yuan, is undervalued in purchasing power parity terms, both on absolute measures and relative to China's net foreign assets. It thinks that the currency could appreciate by an average of 1.5 per cent to 2.5 per cent a year, over the next 10 years against its trade-weighted basket of currencies.

“Firstly, the People's Bank of China has adopted a more orthodox monetary policy than the majority of western central banks. Secondly, the US dollar is the world's reserve currency and is likely to remain so for several years. However, US fundamentals have been deteriorating, creating an opportunity for the renminbi,” Guinness said. “Thirdly, China's current account is growing, in part due to excessive stimulus in the West, but also because of China's lower inflation rate, which aids competitiveness. Lastly, 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, which we believe will contribute to renminbi's appreciation.”

Guinness now offers three China-focused funds: the Guinness RMB Income Fund, the recently-launched Guinness China A Share Fund and the Guinness Greater China Fund (formerly, Guinness Best of China Fund, renamed in January to more accurately reflect its focus on stocks across China, Hong Kong and Taiwan), launched in 2015.