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Mutual Recognition of Funds Education Corner

As the premium choice for RMB services, BOCHK offers you all-round “Recognised Mainland Fund” investment services, helping you grasp the investment opportunities in the Mainland.

View the video now to know the potential investment opportunities from the Mutual Recognition of Funds!

 

  • Introduction of MRF

    Q: What is Mainland-Hong Kong Mutual Recognition of Funds (MRF)?

    A: Effective from 1 July 2015, Mainland and Hong Kong publicly offered funds that fulfill the eligibility requirements are allowed to follow streamlined approval procedure to obtain authorization of public offering in the host jurisdiction：

    Q: Any eligibility requirements should the funds meet to obtain the MRF authorization?

    A:  Both Mainland and Hong Kong funds need to meet the eligibility requirements as below:

    Establishment
    Requirement
    • Established, managed and operated in accordance with the laws and regulations of home jurisdiction
    • Regulated by regulatory body in the home jurisdiction
    • Publicly offered funds domiciled in the home jurisdiction
    Year of Establishment
    • Established over 1 year
    Minimum Fund size
    • Not less than RMB 200 million (or its equivalent in a different currency)
    Investment
    Scope
    • Not primarily invested in the host market
    • Equity funds, mixed funds, bond funds, unlisted index funds and physical index-tracking exchange traded funds

    Value of Sales
    • Value of shares / units in the fund sold to investors in the host jurisdiction shall not be more than 50% of the value of the fund’s total assets
    Representative
    • Must appoint a licensed or registered firm in the host jurisdiction to be its representative.

    Q:  Is there any investment quota restriction on the Mainland-Hong Kong MRF?

    A: The investment quota is set at RMB300 billion for fund flows between the Mainland and Hong Kong each way, controlled by the State Administration of Foreign Exchange.

    Source: China Securities Regulatory Commission website, Securities and Futures Commission of Hong Kong website, compiled by BOCHK, as of June 2015

  • How Local Investors Benefit?

    The launch of MRF enriches the choice of financial products to local investors, broadened their investment horizon in the Mainland market:

    A New Way to Invest in RMB

    The RMB deposits in Hong Kong reached up to RMB955.2 billion1. The RMB products have become popular and favored by investors in recent years. RMB products in the local market can be divided into 2 types: onshore and offshore. Through investing in Recognised Mainland Funds, local investors are able to participate in the Mainland market via different assets.

    Range of Major RMB Investment Products

    RQFII ─ Refers to RMB Qualified Foreign Institutional Investors
    ETF ─ Refers to Exchange traded funds

    Remark 1：Source: Hong Kong Monetary Authority, as of April 2015

    More Comprehensive Mainland Market Exposure

    Before the launch of MRF, local investors who would like to directly participate in the Mainland market in form of fund investment can only invest in Qualified Foreign Institutional Investors (QFII) funds or RMB Qualified Foreign Institutional Investors (RQFII) funds.

    The launch of MRF pulls in Recognised Mainland Funds which open up new onshore investment channel for local investors.

    Onshore Mainland Funds comparison:

      QFII Funds RQFII Funds Recognised Mainland Funds

    Settlement
    Currency

    		 USD RMB RMB

    Product
    Issuer

    Offshore
    Foreign Fund Houses

    		 Chinese Fund Houses/
    Securities Firms
    in Hong Kong

    Onshore
    Fund Houses
    Fund Type Mainly equity funds Mainly bond funds Equity, mixed, bond, unlisted index and physical
    index-tracking
    exchange traded funds
    General Asset Allocation Varies
    • Bond Funds
      At least 80% invested in bond
    • Equity Funds
      At least 70% invested in equity
    • Bond Funds
      At least 80% invested in bond
    • Equity Funds
      At least 80% invested in equity
    • Mixed Funds
      Invest in bond, equity, money market instruments or other funds with flexible allocation other than bond funds and equity funds

    Quota
    Restriction
    • Depends on individual quota applied by fund houses
    • Overall quota of RMB270 billion2, controlled by the State Administration of Foreign Exchange
    • Depends on individual quota applied by fund houses/ securities firms
    • Overall quota of RMB300 billion, controlled by the State Administration of Foreign Exchange
    • Value of shares / units sold to investor in Hong Kong not more than 50% of the fund’s total assets

    Remark2：Source: State Administration of Foreign Exchange, as of May 2015

    How can Recognised Mainland Funds Fulfill Different Investment Needs?

    Source: China Securities Regulatory Commission website, Securities and Futures Commission of Hong Kong website, compiled by BOCHK, as of June 2015

  • Why Choose BOCHK?

    Being the expert in cross-border investment and RMB services, BOCHK endeavours to provide quality and efficient RMB financial services:

    Cross-border Investment and RMB Expert

    • The First bank in Hong Kong to offer RMB services
      • The pioneer of RMB exchange business since 1993
      • The First bank to provide RMB exchange service via ATMs
      • The designated bank of the China Securities Depository and Clearing Corporation Limited at the Hong Kong Securities Clearing Company Limited (“HKSCC”)
      • The designated settlement bank of HKSCC for the Northbound Trading of Shanghai-Hong Kong Stock Connect
    • Providing a comprehensive range of RMB investment products, including direct RMB exchange against other currencies, RMB Currency Linked Investment and A shares margin trading etc.
    • A pool of talented RMB experts offering professional and reliable RMB services

    Fund Management Experts in the Mainland and Hong Kong

    • Leverage on the Group’s Fund management arms established in both markets, a pool of experts in investment management to offer customers with superior fund management services:
      Bank of China Investment Management Limited

    BOCHK Asset Management Limited

    BOCI-Prudential Asset Management Limited
    Company Background
    • Established in 2004
    • Direct holding of Bank of China
    • Established in 2010
    • Wholly owned subsidiary of BOC Hong Kong (Holdings) Limited
    • Established in 1999
    • Jointly established by BOCI Asset Management Limited and Prudential Corporation Holdings Limited

     

    Assets under Management(AUM)

    (as of 2014 year end)
    • Manage 44 publicly offered funds in the Mainland (AB combined calculation)
    • AUM up to RMB160.9 billion
    • Manage 5 local retail funds
    • Offer discretionary mandates, management and advisory services
    • AUM reaches USD7.9 billion
    • Manage 32 local retail funds
    • Manage 5 ETFs
    • One of the top 4 MPF investment managers in Hong Kong1
    • AUM reaches USD10.8 billion

    Recent Awards
    • 2015 March and 2014 March “China Securities Journal” presented “Top 10 Golden Bull Fund Management Company”2
    • 2015 April and 2014 April “Shanghai Securities News” presented "Golden Fund TOP Company Award"2
    • 2015 April and 2014 June “STCN" presented "Five Years of Sustained Performance Star Fund Company Award"2
    • 2014 “Asia Asset Management” presented3
      • Best RMB Manager
      • Best RMB Bonds, Offshore, Three Years
    • 2014 “BENCHMARK” presented "House Awards – Mutual Fund"3
    • 2015 “Thomson Reuters” presented "Thomson Reuters Lipper Fund Awards 2015, Hong Kong-Best Fund over 3 Years, Equity Sector Real Estate Holdings Asia Pacific-BOCHK Asia Pacific Property Fund”4
    • 2014 “CAPITAL” presented "CAPITAL Merits of Achievements in Banking & Finance 2014-MPF Service”5
    • 2014 "Economic Digest" presented "The Outstanding Brand Awards 2014-MPF Fund Manager"6

    Source: Bank of China Investment Management, BOCHK Asset Management Limited and BOCI-Prudential

    Asset Management Limited, as of June 2015

    Partnership with Mainland professionals to Offer Diverse Range of Fund Choices

    • First bank to distribute RQFII funds, forges strategic partnership with 13 renowned Mainland fund houses and now distributes more than 16 RQFII funds
    • Partners with over 25 local and foreign fund houses to offer comprehensive range of RMB fund product choices including equity funds, balanced funds and bond funds which cover various asset, currencies and dividend distribution classes  
    • Cherry-pick new products capturing investment opportunities that best suit your investment needs

    Strong Network in the Mainland and Hong Kong

    • BOCHK, Nanyang Commercial Bank and Chiyu Banking Corporation offers extensive branch network in Hong Kong. You can also conveniently access our RMB services via different channels including ATMS, Internet Banking, Mobile Banking and Phone Banking
    • BOCHK Group comprising its subsidiaries banking institution offers you banking convenience through our branches in major cities in the Mainland of China
    • Our parent bank, Bank of China, is one of the four state-owned banks
      • Extensive service network in the Mainland of China and abroad
      • Long-term business relationships with financial institutions in the Mainland

    Remarks:

    1. Source: Gadbury Group Limited. Gadbury Group Market Shares Report (as at 31 December 2014).

    2. Source: Please refer to http://www.jnlc.com/fund/jinniujiang for further information about China Securities Journal’s Golden Bull Award. Please refer to http://caifu.cnstock.com/financing/cfs/2015/hjmd for further information about Shanghai Securities News’ Golden Fund Award. Please refer to http://www.stcn.com for further information about Securities Times’ Star Fund Award.

    3. Source: Please refer to www.asiaasset.com for further information about Asia Asset Management’s annual Best of the Best Awards. Please refer to www.fundawards.asia for further information about Benchmark’s Fund of the Year Awards 2014.

    4. Source: Thomson Reuters Lipper Fund Awards 2015, Hong Kong. Data as of 31 December, 2014, evaluated by Thomson Reuters Lipper Fund Awards 2015, Hong Kong according to its judging criteria. For details of the award, please refer to the website at http://excellence.thomsonreuters.com/award/lipper/country?region=Hong+Kong.

      BOCHK Asia Pacific Property Fund (the ‘‘Sub-Fund’) has been authorized by the SFC under section 104 of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) and the Code on Unit Trusts and Mutual Funds but not the Code on Real Estate Investment Trusts. SFC authorization is not a recommendation or endorsement of the Sub-Fund, nor does it guarantee the commercial merits of the Sub-Fund or its performance. It does not mean the Sub-Fund is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. Investors should note that Bank of China (Hong Kong) Limited is not the Manager of the Sub-Fund and will only act as the Sponsor and Distributor whilst BOCI-Prudential Asset Management Limited is the Manager.

      Investment involves risk and the funds may not be suitable for everyone. In relation to BOCHK Asia Pacific Property Fund, the Sub-Fund seeks to provide medium- to long-term capital appreciation opportunity by investing in a diversified portfolio of property-related investment instruments (which may include real estate investment trusts (“REITs”)) in Asia Pacific; past performance is not indicative of future performance. The Sub-Fund is subject to market and exchange rate fluctuations and to the risks inherent in all investments. Investors could face no returns and/or suffer significant loss related to the investments; the key risks to which the Sub-Fund is subject to include: real estate securities risk, real estate investment trust tfolio of property-related investment instforeign exchange risk, credit risk and counterparty risk, derivative instruments risk and tax risk. The award information is for reference only. You should not solely rely on the stand-alone marketing material to make any investment decision. Please refer to the offering document of the funds for further details including investment policy and risk factors, before making any investment decision.

    5. Source: CAPITAL. Evaluated by CAPITAL according to its judging criteria - the votes were cast by Panel of Judges (50% of the votes) and CAPITAL Editorial Board (50% of the votes).

    6. Source: Economic Digest. Evaluated by Economic Digest according to its judging criteria - the short list was decided by Economic Digest; whereas the votes for the final winners were cast by the judging committee (30% of the votes) and the public (70% of the votes) .

     

Important Notes
The following Risk Disclosure Statement may not disclose all the risks involved. You should undertake your own research and study before you trade or invest. You should carefully consider whether trading or investment is suitable in light of your own financial position and investment objectives.

Risk Disclosure Statement
The above information is for reference only. This webpage does not constitute any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. The investment products or services mentioned in this webpage are not equivalent to, nor should it be treated as a substitute for, time deposit. Although investment may bring profit opportunities, each investment product or service involves potential risks. Due to dynamic changes in the market, the price movement and volatility of investment products may not be the same as expected by you. Your fund may increase or reduce due to the purchase or sale of investment products. The value of investment funds may go up as well as down and the investment funds may become valueless. Therefore, you may not receive any return from investment funds. Part of your investment may not be able to liquidate immediately under certain market situation. The investment decision is yours but you should not invest in these products unless the intermediary who sells them to you has explained to you that these products are suitable for you having regard to your financial situation, investment experience and investment objectives. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product. Investment involves risks. Please refer to the relevant fund offering documents for further details including risk factors. If you have any inquiries on this Risk Disclosure Statement or the nature and risks involved in trading or funds etc, you should seek advice from independent financial adviser.

Risks Associated with the MRF Arrangement

  • Quota restrictions: The Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme is subject to an overall quota restriction. Subscription of units in the Fund may be suspended at any time if such quota is used up.
  • Failure to meet eligibility requirements: If a Recognised Mainland Fund ceases to meet any of the eligibility requirements under the MRF, it may not be allowed to accept new subscriptions.  In the worst scenario, the Securities and Futures Commission may even withdraw its authorization for the Fund to be publicly offered in Hong Kong for breach of eligibility requirements. There is no assurance that the Fund can satisfy these requirements on a continuous basis.
  • Mainland tax risk: The tax arrangement on Mainland tax relating to investment in a Recognised Mainland Fund is currently unclear. Investors may be subject to uncertainties in the Mainland tax liabilities.
  • Different market practices: Market practices in the Mainland and Hong Kong may be different. In addition, operational arrangements of Recognised Mainland Funds and other public funds offered in Hong Kong may be different in certain ways. For example, a Recognised Mainland Fund may only accept subscriptions or redemption of units on a day when both Mainland and Hong Kong markets are open, or it may have different cut-off times or dealing day arrangements versus other Hong Kong funds. Investors should ensure that they understand these differences and their implications.

Concentration risk / Mainland market risk
The Fund invests primarily in securities related to the Mainland market and may be subject to additional concentration risk. Compared to investment in other markets, investing in the Mainland may give rise to different risks including political, policy, tax, economic, foreign exchange, legal, regulatory and liquidity risks.

RMB currency and conversion risks
RMB is currently not freely convertible and is subject to exchange controls and restrictions.

Non-RMB based investors are exposed to foreign exchange risk and there is no guarantee that the value of RMB against the investors’ base currencies (for example HKD) will not depreciate. Any depreciation of RMB could adversely affect the value of investor’s investment in the Fund.

Investors may not receive RMB upon redemption of investments and/or dividend payment or such payment may be delayed due to the exchange controls and restrictions applicable to RMB.

RMB Conversion Limitation Risk
RMB investments are subject to exchange rate fluctuations which may provide both opportunities and risks. The fluctuation in the exchange rate of RMB may result in losses in the event that the customer converts RMB into HKD or other foreign currencies.

  • Only applicable to Individual Customers - RMB is currently not fully freely convertible. Individual customers can be offered CNH rate to conduct conversion of RMB through bank accounts and may occasionally not be able to do so fully or immediately, for which it is subject to the RMB position of the banks and their commercial decisions at that moment. Customers should consider and understand the possible impact on their liquidity of RMB funds in advance.
  • Only applicable to Corporate Customers - RMB is currently not fully freely convertible. Corporate customers that intend to conduct conversion of RMB through banks may occasionally not be able to do so fully or immediately, for which it is subject to the RMB position of the banks and their commercial decisions at that moment. Customers should consider and understand the possible impact on their liquidity of RMB funds in advance.

This webpage is issued by Bank of China (Hong Kong) Limited. The contents of this webpage have not been reviewed by the Securities and Futures Commission in Hong Kong.