Premia China Treasury & Policy Bank Bond Long Duration ETF
(USD Hedged Unit Class – Distributing Unit Class)
IMPORTANT: Investment involves risk, including the loss of principal. Investors should refer to the Prospectus and Key Facts Statement of Premia China Treasury and Policy Bank Bond Long Duration ETF (the "ETF") for details, including the risk factors. Investors should not base investment decisions on this marketing material alone. Investors should note:
The ETF aims to provide investment results that, before fees and expenses, closely correspond to the performance of ICE 10+ Year China Government & Policy Bank Index (“Index”).
Concentration / PRC market risks
The ETF’s investments are concentrated in the PRC with a focus on Treasury and Policy Bank Bonds. The value of the ETF may be more volatile than that of a fund having a more diverse portfolio of investments. The value of the ETF may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the PRC market.
Currency exchange risk
A class of units may be designated in a currency other than the base currency of the ETF. The net asset value of the ETF may be affected unfavorably by fluctuations in the exchange rates between these currencies and the base currency and by changes in exchange rate controls.
For USD Hedged Unit Class, there is no guarantee that the exposure of the currency in which the units are denominated can be fully hedged at all times against the base currency of the Sub-Fund or the currency or currencies in which the assets of the Sub-Fund are denominated. Investors should also note that the successful implementation of the strategy may substantially reduce the benefit to unitholders in the USD Hedged Unit Class as a result of decreases in the value of the USD Hedged Unit Class against the base currency of the Sub-Fund. In the event that investors request payment of redemption proceeds in a currency other than the currency in which the units are denominated (i.e. USD in the instance of the USD hedged Unit Class), the exposure of that currency (e.g. HKD) to the currency in which the units are denominated (i.e. USD) will not be hedged.
China related risks
PRC Sovereign Debt risks - The ETF’s investment in securities issued or guaranteed by governments may be exposed to political, social and economic risks. In adverse situations, the sovereign issuers may not be able or willing to repay the principal and/or interest when due or may request the ETF to participate in restructuring such debts.
PRC inter-bank bond market and Bond Connect risks – Investing in the PRC Inter-bank bond market via Bond Connect is subject to regulatory risks and various risks such as volatility risk, liquidity risk, settlement and counterparty risk as well as other risk factors typically applicable to debt securities. The relevant rules and regulations on investment in the PRC inter-bank bond market via Bond Connect are subject to change which may have potential retrospective effect.
Operational and settlement risk – To the extent that the ETF transacts in the inter-bank bond market in the PRC, the ETF may also be exposed to risks associated with settlement procedures and default of counterparties.
Volatility and liquidity risk - The debt securities in the PRC market may be subject to higher volatility and lower liquidity compared to more developed markets. The prices of securities traded in such markets may be subject to fluctuations.
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.
Debt securities market risks
Valuation risk – Valuation of the fund’s instruments may involve uncertainties and judgmental determinations. If such valuation turns out to be incorrect, this may affect the Net Asset Value of the ETF.
Interest rate risk - Interest rate risk is the risk that fixed income securities will decline in value because of an increase in interest rates and changes to other factors, such as perception of an issuer’s creditworthiness. Funds with higher durations generally are subject to greater interest rate risk.
Credit rating and downgrading risk – Credit ratings assigned by rating agencies are subject to limitations and do not guarantee the creditworthiness of the security and/or issuer at all times. The credit rating of a debt instrument or its issuer may subsequently be downgraded.
Risks relating to currency hedging and the USD Hedged Unit Class
The Manager may (but is not obliged to) enter into certain currency related transactions in order to hedge the currency exposure of the assets of the Sub-Fund attributable to the USD Hedged Unit Class into the currency being hedged in that relevant class. Investors in the USD Hedged Unit Class may have exposure to currencies other than the currency of that class. In comparison to the Unhedged Unit Class (USD counter), investors should also be aware that the hedging strategy may substantially limit the benefits of any potential increase in value of the USD Hedged Unit Class expressed in USD, if the USD falls against the base currency of the Sub-Fund. Such differences compared to the Unhedged Unit Class will lead to differences in Net Asset Value between the unit classes.
The precise hedging strategy applied to the USD Hedged Unit Class may vary. In addition, there is no guarantee that the desired hedging instruments will be available or hedging strategy will achieve its desired result. In such circumstances, investors of the USD Hedged Unit Class may still be subject to the currency exchange risk on an unhedged basis.
If the counterparties of the instruments used for hedging purposes default, investors of the USD Hedged Unit Class may be exposed to the currency exchange risk on an unhedged basis and may therefore suffer further losses.
Foreign exchange, other currency distribution and distributions out of or effectively out of capital risk
All Units of the USD Hedged Unit Class will receive distributions in USD only. In the event that the relevant Unitholder has no USD account, the Unitholder may have to bear the fees and charges associated with the conversion of such distribution from USD to HKD or any other currency. The Unitholder may also have to bear bank or financial institution fees and charges associated with the handling of the distribution payment.
The Sub-Fund’s base currency is in RMB but has Units of the USD Hedged Unit Class traded in USD. Secondary market investors may be subject to additional costs or losses associated with fluctuations in the exchange rates between USD and the base currency and by changes in exchange rate controls when trading Units of the USD Hedged Unit Class in the secondary market if the hedging strategy is unable to achieve its desired results.
Payment of dividends out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distributions may result in an immediate reduction in the Net Asset Value per Unit of the USD Hedged Unit Class of the Sub-Fund.
The distribution amount and NAV of the USD Hedged Unit Class may be adversely affected by differences in the interest rates of the reference currency of the USD Hedged Unit Class and the Sub-Fund’s base currency, resulting in an increase in the amount of distribution that is paid out of capital and hence a greater erosion of capital than the Unhedged Unit Class.
New Index Risk
The Index is a new index. The ETF may be riskier than other exchange traded funds tracking more established indices with longer operating history.
Securities Lending Transactions Risk
Securities lending transactions may involve the risk that the borrower may fail to return the securities lent out in a timely manner and the value of the collateral may fall below the value of the securities lent out.
Passive investments risk
The ETF is passively managed and the Manager will not have the discretion to adapt to market changes due to the inherent investment nature of the Sub-Fund. Falls in the Index are expected to result in corresponding falls in the value of the Sub-Fund.
Reliance on market maker and liquidity risks
Although the Manager will ensure that at least one Market Maker will maintain a market for the Units in each counter, and that at least one Market Maker in each counter gives not less than 3 months’ notice prior to terminating the relevant market maker agreement, liquidity in the market for Units may be adversely affected if there is no or only one Market Maker for the Units. There is no guarantee that any market making activity will be effective.
PRC tax risk
There are risks and uncertainties associated with the current PRC tax laws, regulations and practice in respect of capital gains realised on the Sub-Fund's investments in PRC bonds (which may have retrospective effect). Any increased tax liabilities on the Sub-Fund may adversely affect the Sub-Fund’s value.
Based on professional and independent tax advice, the Manager does not currently make withholding income tax provision for gross realised or unrealised capital gains derived from trading of onshore Treasury and Policy Bank Bonds.
Why 9177 HK?
- Sovereign Credit: 100% investing in Chinese treasury and policy bank bonds with A1 China sovereign rating
- Access to Long Duration Chinese Government Securities: Unique exposure for investors with long duration asset-liability management or diversification needs
- Attractive Yield Potential: Long duration China government bonds consistently provide attractive yield and favourable yield differential with major government bonds
- Operational Efficient: Listed on HKEx with intraday liquidity and minimal operational hassle
- Cost Efficient: ongoing expenses of only 0.28% p.a.
Fund Objective and Investment Strategy
The investment objective of the ETF is to provide investment results that, before fees and expenses, closely correspond to the performance of the ICE 10+ Year China Government & Policy Bank Index. There can be no assurance that the ETF will achieve its investment objective.
In seeking to achieve the ETF’s investment objective, the Manager will use an optimised representative sampling strategy by investing directly in a representative sample of the RMB denominated and settled bonds issued by the Government of China, the China Development Bank, the Agricultural Development Bank of China or the Export-Import Bank of China and distributed within the PRC that collectively reflects the investment characteristics of the Index.
The ETF may use financial derivative instruments for hedging purposes only. The ETF’s net derivative exposure may be up to 50% of the Sub-Fund’s net asset value. There is no guarantee that the desired hedging instruments will be available or hedging strategy will achieve its desired results.
NAV and Intraday Estimated NAV