What are QFII and R-QFII? .
QFII (Qualified Foreign Institutional Investor)
QFII can in principle be used to invest up to 35% of a UCITS’ net assets in RMB securities. This limit set by the CSSF results from restrictions which apply to repatriations under QFII rules. UCITS open ended China funds willing to invest over 35% of their net assets in RMB securities have to provide the CSSF with additional information regarding the liquidity of their portfolio.
R-QFII (RMB Qualified Foreign Institutional Investor)
R-QFII can in principle be used to invest up to 100% of a UCITS’ net assets in RMB securities. After the Shanghai Stock Exchange and the Shenzhen Stock Exchange, the China inter-bank bond market has been recognized as a UCITS eligible market and, as a result, RMB bonds dealt on this market may also be invested by R-QFII UCITS funds. The recognition of Luxembourg as R-QFII centre in April 2015 opened new possibilities for Luxembourg UCITS.
Managers benefitting from QFII and/or R-QFII licenses and quotas, and now from Stock Connect and the CIBM Direct Access, should feel encouraged to use Luxembourg funds to implement PRC strategies and raise money in the EU, the Middle-East, Latin America and Asia.
Certain limitations still apply, but they will progressively disappear as the PRC capital markets open up, the RMB becomes more international, the QFII and R-QFII regimes converge and other schemes such as Stock Connect and the CIBM Direct Access, and perhaps soon a Bond Connect, are put in place.
The UCITS passport is available to those managers, as well as, under certain conditions the alternative investment fund managers directive passport (for Part II funds and SIFs), allowing a fast track distribution of those products across Europe.
A door has been opened with the approval in Luxembourg of this first R-QFII UCITS and a way has been paved with the subsequent approval of the CIBM as a UCITS eligible market, the authorization of the use of Stock Connect and the CIBM Direct Access by UCITS and the recognition of Luxembourg as a R-QFII centre. Luxembourg has positioned itself to fully take advantage of this as well as future developments. It is actively involved in those developments, and aims at continuing giving managers the ability of using its robust and recognised vehicles to structure and distribute those PRC strategies on a global basis.
How can we be of assistance?
In order to ensure better coverage of China and the Asia Pacific region, we opened an office in Hong Kong in 2009. Our firm’s experience in helping Asian and Chinese companies do business in Europe has been widely recognized in the market for many years, and we are proud to have partnered with a number of Chinese financial institutions in their European expansion in particular in the banking, investment funds, corporate fields.
Chinese companies expanding globally and the internationalization of RMB are creating tremendous opportunities for banks, insurance companies, private equity funds and hedge funds and investment managers. In the meantime, doing business is becoming more complicated in a global context. We serve our clients with a one-stop-shop solution, from the legal engineering to the implementation phase.
Our firm’s approach is to partner with business leaders and provide solutions that will help achieve their goals.
