UBS approved to revive closed-end funds
(Shanghai Daily)Updated: 2007-07-03 08:46 Swiss bank UBS AG's mainland fund venture has become the first firm approved to revive domestic sale of closed-end funds, not seen since 2001, amid efforts by China's stock regulator to expand the product scope.
UBS SDIC Fund Management, 49 percent held by UBS, has gained the nod from the stock regulator to market an innovative closed-end fund, the company said yesterday on its Website.
The proposed fund product will consist of two sub funds with one traded
on the Shenzhen stock exchange for "risk-prefer" investors and a non-listed one
for "risk-averse" investors.The exchange-traded sub fund will have a life span of five years before its liquidation, unlike 15 years on average for normal closed-end funds, the firm said.
The non-listed sub fund is set to operate like an open-end product, which is set to churn out more than 60 percent of the increase in its net value as dividends to investors each year.
UBS SDIC plans to initially raise three billion yuan (US$394 million) each for the sub funds, which are allowed to place up to 100 percent of assets in stocks, versus an 80 percent ceiling for traditional closed-end funds.
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Closed-end funds usually have a fixed number of units sold to investors and trade on bourses like normal shares. They often have a fixed life span, during which investments cannot be redeemed.
Open-end funds, which are not publicly traded, pool client capital periodically and invest in equities. Investors can choose to redeem the funds at any time after the initial lock-up period.
Industry sources told Shanghai Daily last month that UBS SDIC and Dacheng Fund Management Co were likely to become the first batch of firms to revive closed-end funds.
Dacheng said late last month it may get the regulatory green light for the sale of its new closed-end fund soon.
Other industry players including ICBC Credit Suisse Fund Management and China Southern Fund Management are also finalizing plans to unveil closed-end products.
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