Allocation of overseas assets, QDII** is a very convenient way, today we will take you to understand QDII**.
1. What is Q?dii
QDII is an acronym for "Qualified Domestic Institutional Investor". QDII is a transitional institutional arrangement that allows domestic investors to invest in overseas markets on a limited basis when China's RMB has not been freely convertible and the capital account has not yet been opened.
With the approval of the China Securities Regulatory Commission, qualified domestic management companies can raise funds to issue QDII in China and make overseas investments. To put it bluntly, it is to raise funds by issuing funds in China, and then invest in assets such as **, bonds, commodities, real estate or REITs in overseas markets.
QDII** can be raised in RMB, USD or other major foreign exchange currencies. For example, the GF Nasdaq 100 Index C RMB (QDII) is subscribed and redeemed in RMB, while the GF Nasdaq 100 Index C USD (QDII) is subscribed and redeemed in US dollars.
The QDII** raised by the issuance of RMB should be converted into foreign currency before investing overseasSimilarly, when an investor redeems, the company also sells overseas assets, converts foreign currency into RMB, and then pays the investor's redemption funds.
II. QdiiClassification
By TransactionDivision of premises
QDII** is also divided into on-exchange and off-market according to different trading venues. The market** mainly includes ETFs and LOFs, such as ChinaAMC Hang Seng ETF, Harvest H-share Index (QDII-LOF), etc., which can be traded like **. Because most of the ** overseas markets are T+0 trading system, QDII's ETF is also a T+0 trading system, and you can buy and sell at any time during the trading hours of the day.
OTC QDII**, it should be noted that its **net value announcement is one trading day later than ordinary**, and the shares subscribed before 15 o'clock on T day can only be confirmed on T+2 day. In addition, because of the overseas investment, the arrival time of the redemption funds is longer than that of the domestic public offering**, generally 5-7 days, or even longer.
, according to the asset class of investment
According to the asset class of investment, QDII** can also be divided into four types: **type, hybrid, bond-type, and alternative**, which is the same as the classification method of domestic ordinary public offering**.
3. Classification according to investment area
According to the classification of investment regions, the current QDII** can be divided into: single country and region QDII, emerging market QDII, and cross-market QDII.
Among them, QDII in a single country and region includes QDII in Hong Kong, China (e.g., ChinaAMC Hang Seng ETF Connect A**), German QDII (e.g., Huaan Germany 30 (DAX) ETF Connect**), and US QDII (e.g., Harvest US Growth RMB**).
Emerging market QDII also includes Greater China QDII (e.g., Guofu Greater China Select RMB**), global emerging market QDII (e.g., Harvest Emerging Markets A1**), and BRIC QDII (e.g., Prudential BRICS**).
Cross-market QDII includes global QDII (e.g., ChinaAMC Global Select**), Asia-Pacific QDII (e.g., CIFM Asia Pacific Advantage**), and Asian QDII (e.g., E Fund Asia Select**).
According to the definition of QDII**'s product contract, the currently established QDII** investment regions are mainly in the world, the United States and Hong Kong, China, and a small number of ** investors in the Asia-Pacific region, Greater China, BRIC countries, Germany, India, etc.
III. Qdii**Features:
It is a way to diversify asset allocation
QDII** invests in overseas assets, so investing in QDII** can achieve the purpose of asset diversification and risk diversification. Warren Buffett said "don't put all your eggs in one basket", if you encounter the market of the 2018 A-share bear market, there is a high probability that you will lose money when investing in China, but if you have a certain QDII** allocation, you may have good returns. The East is not bright and the West is bright, and investing in QDII** is this reason.
, the quota is limited, and approval is required
According to the regulations, the State Administration of Foreign Exchange (SAFE) will approve the quota for Qualified Domestic Investors (QDIIs) participating in outbound investment. In other words, the foreign exchange quota of QDII** is limited, and once the foreign exchange quota is used up, QDII** will be forced to stop subscribing. For example, in March 2020, international oil prices fell sharply, falling below $30 per barrel, and many investors entered the market, and QDII, which invested in international and industry, was snapped up, and soon suspended because the foreign exchange quota was used up.
But it is difficult for investors to imagine that oil prices will fall into negative numbers.
As of 30 August 2021, the Qualified Domestic Institutional Investor (QDII) Investment Quota Approval Table released by the State Administration of Foreign Exchange (SAFE) shows that the approved QDII quota is 1,498$1.9 billion.
Among the ** companies, E Fund currently has the highest cumulative approval amount, about 58500 million US dollars, followed by Huaxia**, Nanfang**, Harvest**, GF**, etc., are all leading companies.
According to wind statistics, as of September 16, 2021, there are still 28 QDIIs** that are suspended, including the largest E Fund Premium Select**.
3. Exchange rate risk is a double-edged sword
Investing in RMB-denominated QDII** exposes you to exchange rate risk that is not available in China**. Because most QDII products are RMB, and the tracking is the US dollar, the rise and fall of the RMB against the US dollar will disturb the performance.
For example, in 2016, the yuan depreciated by 65%, if you use RMB to invest overseas in early 2016, you will convert RMB into US dollars at that time, and wait until the year-end settlement, and then settle the US dollars back to RMB to calculate the product performance. In this way, if the investment income of ** itself is 9%, and the RMB sells first and then buys 65% income, so that the total income of RMB products is 9%+65%=15.5%；In 2017, the renminbi appreciated by 63%, and in the same period, the return of QDII** will be 6 less than the original investment income3%。
For example, 050025 Bosera S&P 500 ETF Connect A** is an index that tracks the S&P 500 Index
Earnings in 2016 were 1657% compared to the S&P 500**9 over the same period54%,* significantly outperformed the index;
Earnings in 2017 were 1216%, compared to 19 for the S&P 500 over the same period42%, *significantly underperformed the index;
The 2018 earnings were -124%, and the S&P 500 fell -624%,* outperformed the index by a wide margin;
For three consecutive years, ** returns have deviated greatly from the S&P 500 index, mainly due to fluctuations in the exchange rate of the RMB against the US dollar, except for a small tracking error.
As can be seen, exchange rate fluctuations are a double-edged sword for QDII**. If you don't want to be disturbed by the RMB exchange rate, you can directly buy the US dollar QDII**.
In addition, QDII** investment in overseas national markets will also face corresponding country risks, emerging market risks and other special investment risks.