PowerShares Files For PowerShares China A-Share Portfolio
PowerShares has filed paperwork with the SEC for a “PowerShares China A-Share Portfolio.” The PowerShares China A-Share Portfolio (the “Fund”) is an actively managed exchange-traded fund (“ETF”) that seeks to achieve [positive total returns]. They did not specify a trading symbol or expense ratio in the initial filing.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its assets in investments that provide exposure to the China A-Shares market, including futures contracts, swap transactions and structured notes, as well as directly in A-Shares themselves to the extent permissible under Chinese law. The Fund expects to invest its remaining assets in U.S. government securities, money market instruments (including repurchase agreements), cash and cash equivalent securities (i.e., corporate commercial paper) in order to collateralize investments in futures or derivatives or for other purposes. The Fund is actively managed by the Adviser and is not designed to track the performance of any index. The Fund is not leveraged.
“A-Shares” are shares of stock that are issued by companies incorporated in mainland China and that are traded in Renminbi on the Shanghai Stock Exchange or the Shenzen Stock Exchange. Due to strict controls imposed by the Chinese government, the Fund currently cannot invest directly in A-Shares, which are available only to domestic Chinese investors and a limited pool of foreign investors, including foreign investors who have been approved as a Qualified Foreign Institutional Investor (“QFII”) by the China Securities Regulatory Commission (“CSRC”) and have obtained a QFII license. After obtaining a QFII license, a QFII applies to China’s State Administration of Foreign Exchange for a specific aggregate dollar amount investment quota of A-Shares (the “A-Share Quota”) in which the QFII can invest. In order for the Fund to invest directly in A-Shares, Invesco PowerShares Capital Management LLC (the “Adviser”) would need to apply for a QFII license and obtain an A-Share Quota.
Because it currently cannot invest in A-Shares directly, the Fund will invest primarily in stock index futures that provide exposure to the China A-Shares market, including futures contracts listed on the Singapore Exchange on the FTSE China A50 Index — a free-float adjusted, weighted index comprised of the 50 largest A-Share companies in the FTSE China A All-Shares Index. By investing in futures contracts on the FTSE China A50 Index, the Fund will have no direct ownership of the A-Shares of the 50 companies included in the index, but will gain exposure to the performance of those companies. The Fund also may invest in other exchange-listed futures contracts based on other, broader indices comprised of China A-Shares, should those contracts become listed on a non-Chinese exchange in the future, thereby permitting investment by the Fund.
If the Adviser obtains a QFII license, the Fund may invest directly in A-Shares through the QFII license. There are no assurances that such a QFII license would be granted, or that such a license, if granted, would permit the Fund to purchase A-Shares in an amount necessary to provide the Fund with sufficient A-Shares exposure. Currently, the Fund is not permitted under Chinese law to invest directly in A-Shares traded on the Shanghai or Shenzen Stock Exchanges other than through a QFII license, and there is no assurance that Chinese regulations would be amended to permit such investments.
[The Fund may also seek to gain exposure to the A-Shares market through investments in a subsidiary organized in the Cayman Islands (the “Subsidiary”) that in turn would make investments in futures contracts that provide exposure to China A-Shares. If utilized, the Subsidiary would be wholly-owned and controlled by the Fund. The Fund’s investment in the Subsidiary could not exceed 25% of the Fund’s total assets at each quarter end of the Fund’s fiscal year. Any investment by the Fund in the Subsidiary is expected to provide the Fund with exposure to A-Share returns within the limits of the federal tax requirements applicable to investment companies, such as the Fund. Except as noted, references to the investment strategies and risks of the Fund include the investment strategies and risks of the Subsidiary.]
The Fund’s investments in instruments that provide exposure to the China A-Shares market, including futures contracts, swap transactions and structured notes, will count toward the Fund’s 80% policy to the extent that these investments are linked to the performance of China A-Shares. If, subsequent to an investment, the 80% requirement no longer is met, the Fund’s future investments will be made in a manner that will bring the Fund into compliance with this policy. The Fund will provide shareholders with 60 days’ prior notice of any change to this policy.
For the complete filing click: HERE