Primary investments
The Sub-Fund seeks to achieve its objective by investing not less than 70% of its Net Asset Value in HKD denominated and settled short-term deposits, high quality money market instruments of varying maturities issued by governments, quasi-governments, international organizations, financial institutions and corporates globally, and such other securities as permitted bythe Securities and Futures Commission (“SFC”)’s Code on Unit Trusts and Mutual Funds (the “UT Code”). Investments in non-HKD denominated and settled short-term deposits and high quality money market instruments may be up to 30% of the Net Asset Value of the Sub-Fund. The Manager may hedge any non-HKD denominated investments into HKD in order to manage any material currency risk.
Money market instruments refer to securities normally dealt in on the money markets, for example, fixed income and debt securities (including fixed and floating rate securities and government bills), commercial papers, certificates of deposit, short-term notes, commercial bills and bankers' acceptance. In assessing whether a money market instrument is of high quality, at a minimum, the credit quality and the liquidity profile of the money market instruments must be taken into account.
Weight average maturity and weighted average life
The Sub-Fund will maintain a portfolio with weighted average maturity not exceeding 60 days and a weighted average life not exceeding 120 days and will not purchase an instrument with a remaining maturity of more than 397 days, or 2 years in the case of government and other public securities.
Credit quality
The Sub-Fund will only invest in high quality short-term or short-term remaining maturity fixed income and debt securities rated investment grade or fixed income and debt instruments with issuers of investment grade rating if the instrument itself does not have a credit rating.
Short-term fixed income and debt securities are considered investment grade if their credit ratings or the credit ratings of their issuers are rated A-3 or higher by Standard & Poor’s, or F3 or higher by Fitch, or P-3 or higher by Moody’s, or equivalent rating as rated by one of the international credit rating agencies.
While the Sub-Fund does not intend to invest in fixed income and debt securities with a long term to maturity remaining at the time of investment, the long-term credit ratings will be considered where the Sub-Fund invests in fixed income and debt securities which have been rated long-term credit ratings, but have a shorter term to maturity remaining at the time of investment (subject to the requirements on remaining maturity, weighted average maturity and weighted average life of the portfolio of the Sub-Fund as set out above). For such securities, investment grade means Baa3 or BBB- or above by Standard & Poor’s, Fitch, Moody’s or another recognized credit rating agency for the security or its issuer.
For Mainland China onshore fixed income and debt securities, investment grade means AAA (long-term) or A-1 (short-term) or above by China Chengxin International Credit Rating Co., Ltd or China Lianhe Credit Rating Co., Ltd, or equivalent ratings by one of the local rating agencies recognized by the relevant authorities in Mainland China.
In the case of split credit ratings between different credit rating agencies, the highest rating shall apply.
While the credit ratings provided by the relevant rating agencies serve as a point of reference, the Manager will conduct its own assessment on the credit quality based on various factors including the issuer’s and/or the guarantor’s (if applicable) financial leverage, interest coverage, operating cash flows, industry outlook and competitive position, as well as corporate governance.
The Sub-Fund will not invest in securities issued or guaranteed by any sovereign issuer (including its government, a public or local authority) with a credit rating below investment grade or is unrated.
Liquidity profile
The Manager will assess the liquidity profile of instruments based on various factors, included but not limited to time to cash, external liquidity classification, liquidation horizon, daily trading volume, price volatility and bid-ask spread of such instruments. Only instruments which fulfil the Manager’s liquidity requirements will be included in the portfolio of the Sub-Fund.
Geographical exposure
The Sub-Fund may invest up to 30% of its Net Asset Value in any single country or region other than Greater China (including China onshore market, China offshore market, Hong Kong, Macau and Taiwan) and the United States. The Sub-Fund may invest in aggregate up to 100% of its Net Asset Value in Greater China and the United States.
The Sub-Fund may invest up to 30% of its Net Asset Value in short-term and high quality onshore China fixed income and debt securities, such as government bonds, policy bank bonds, negotiable certificates of the deposits, via the Manager's Qualified Foreign Investor (“QFI”) status or the mutual bond market access between Hong Kong and Mainland China (“Bond Connect”).
Other ancillary investments
The Sub-Fund may invest up to 15% of its Net Asset Value in short-term and high quality asset-backed securities such as asset-backed commercial papers.
The Sub-Fund may invest less than 10% of its Net Asset Value in short-term and high quality urban investment bonds (城投債), which are debt instruments issued by Mainland Chinese local government financing vehicles ("LGFVs"), which are separate legal entities established by local governments and/or their affiliates to raise financing for public welfare investment or infrastructure projects.
The Sub-Fund may invest less than 10% of its Net Asset Value in short-term and high quality convertible bonds. It is not intended that the Sub-Fund will hold equity securities converted from such convertible bonds.
The Sub-Fund may invest up to 10% of its Net Asset Value in aggregate in money market funds that are authorized by the SFC under 8.2 of the UT Code or regulated in a manner generally comparable with the requirements of the SFC and acceptable to the SFC.
The Sub-Fund will not invest in debt instruments with loss-absorption features.
Securities financing transactions, financial derivative instruments and borrowing
The Sub-Fund may enter into Sale and Repurchase Transactions (i.e. transactions whereby the Sub-Fund sells its securities to a counterparty of Reverse Repurchase Transactions and agrees to buy such securities back at an agreed price with a financing cost in the future) provided that the amount of cash received by the Sub-Fund under such transactions may not in aggregate exceed 10% of its Net Asset Value. The Sub-Fund may engage in Reverse Repurchase Transactions (i.e. transactions whereby the Sub-Fund purchases securities from a counterparty of Sale and Repurchase Transactions and agrees to sell such securities back at a pre-determined price in the future) provided that the aggregate amount of cash provided to the same counterparty in reverse repurchase agreements may not exceed 15% of the Net Asset Value of the Sub-Fund. The Sub-Fund will not engage in Securities Lending Transactions.
The Sub-Fund may invest in financial derivative instruments (including but not limited to interest rate swaps and currency swaps) for hedging purposes only.
The Sub-Fund may borrow up to 10% of its Net Asset Value but only on a temporary basis for the purpose of meeting redemption requests or defraying operating expenses.
Spread of investments
The aggregate value of the Sub-Fund's holding of instruments and deposits issued by a single entity may not exceed 10% of its Net Asset Value except: (i) where the entity is a substantial financial institution and the total amount does not exceed 10% of the entity's share capital and non-distributable capital reserves, the limit may be increased to 25%; (ii) in the case of government and other public securities, up to 30% may be invested in the same issue; or (iii) in respect of any deposit of less than USD 1,000,000 or its equivalent in HKD of the Sub-Fund, where the Sub-Fund cannot otherwise diversify as a result of its size.
The aggregate value of the Sub-Fund’s investments in entities within the same group through instruments and deposits may not exceed 20% of its Net Asset Value except: (i) where the entity is a substantial financial institution and the total amount does not exceed 10% of the entity's share capital and non-distributable capital reserves, the limit may be increased to 25%; or (ii) in respect of any deposit of less than USD 1,000,000 or its equivalent in HKD of the Sub-Fund, where the Sub-Fund cannot otherwise diversify as a result of its size.
Investment and borrowing restrictions
The Sub-Fund may borrow up to 10% of its Net Asset Value but only on a temporary basis for the purpose of meeting redemption requests or defraying operating expenses.
The Sub-Fund is a Money Market Fund and is subject to the investment and borrowing restrictions applicable to a Money Market Fund as set out in Schedule 1 to the Prospectus.
Use of derivatives
The Sub-Fund may use financial derivative instruments (including but not limited to interest rate swaps and currency swaps) for hedging purposes only. The currency risk of the Sub-Fund will be appropriately managed. In particular, any material currency risk will be appropriately hedged where the Sub-Fund invests in assets that are not denominated in HKD.
The Sub-Fund’s net derivative exposure may be up to 50% of the Sub-Fund’s Net Asset Value.
Securities Financing Transactions
The Sub-Fund may enter into Sale and Repurchase Transactions provided that the amount of cash received by the Sub-Fund under such transactions may not in aggregate exceed 10% of its Net Asset Value.
The Sub-Fund may engage in Reverse Repurchase Transactions provided that the aggregate amount of cash provided to the same counterparty in reverse repurchase agreements may not exceed 15% of the Net Asset Value of the Sub-Fund.
The Sub-Fund will not engage in Securities Lending Transactions.