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Foreign Exchange

Citic launches renminbi-denominated hedge fund, Asia Hedge reports

Citic Securities has launched a potentially ground-breaking multi-strategy renminbi-denominated hedge fund betting on a steady appreciation of the Chinese currency against the US dollar, reports Asia Hedge, a sister publication to EuromoneyFXNews.

The CSI RMB Fund will employ strategies in FX, credit and interest rates to grow, making it one of the most sophisticated renminbi-denominated strategies yet to come to the market, the website reports.

The fund’s adviser, Citic Securities International Investment Management (CSIIML), which is the asset-management arm of CITIC Securities International in Hong Kong, says it hopes to scale the fund, which targets an annual return of 10-20%, to an asset size of $1 billion, according to Asia Hedge.

The fund’s portfolio manager, Lu Li, formerly ran a $5 billion principal investment portfolio for China Construction Bank and before that was senior FX trader at the bank’s head office, market-making for renminbi currency pairs and trading G7 currency pairs, Asia Hedge reports.

Craig Lindsay, the managing director and chief operating officer of CSIIML who serves as the fund’s chief risk officer, tells Asia Hedge that the offering is the first non-equity-focused fund the firm has offered in the market – and also the first with a renminbi-denominated class of shares. "It is attracting a lot of interest in the market," he says.

The fund manager considers the internationalisation of the renminbi to be the "mega trend for this decade" and expects China to continue its liberalisation in a bid to promote it as an international currency. Citic also sees the currency appreciating against the US dollar at a rate of 5-7% per year for the next three years, Asia Hedge adds.

The CSI RMB Fund includes classes of shares denominated in Hong Kong and US dollars. The fund manager says it will consider directional trades, basis arbitrage and curve trading as part of its FX strategy and will also pursue a long/short credit strategy investing in the offshore renminbi ‘Dim Sum’ bond market, as well as in US dollar bonds, and will use credit derivatives to hedge the portfolio.

CSIIML has established a strong track record in the greater China markets with several equity-focused funds, but this is the first time it is focusing on fixed income and foreign exchange.

AHL, the flagship fund from MAN Group, the world's largest publicly traded hedge-fund manager, earlier this month claimed to be one of the first funds to include a renminbi share class in its managed futures fund.

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