Managers get set for rise of the renminbi

FT reports: More fund houses are rolling out funds and share classes denominated in renminbi, or contemplating the idea, as they look to profit from the Chinese currency’s likely rise against the US dollar and its importance on the world stage. Indeed, while investment choices are still scarce, the sweep of renminbi-denominated investments on offer already ranges from bonds and funds to certificates of deposit, currency swaps and insurance products.

Some fund managers argue that renminbi-denominated share classes of traditional funds are a superior play on the appreciation of the renminbi as they offer the chance to register a currency gain as well as a return on underlying investments higher than the inflation rate.

Just this month, Pharo Management UK revealed plans to become the first hedge fund manager to create shares in an investment vehicle denominated in renminbi. Investors in Pharo’s flagship fund do not have to hold renminbi as the fund’s administrator can handle spot exchanges into the currency. This underscores the extent to which the future of the US dollar and the rising power of the renminbi – dubbed the redback – are becoming concerns for investors.

“We think you should set up a renminbi share class for the same reason you might create a share class in euros or sterling,” says Peter Fegelman, a senior manager with Pharo. “Investors are looking to hold non-US dollar currencies and we do believe the renminbi will appreciate.