For decades, the Washington-based World Bank went to the biggest financial players in the world when it wanted cash, but now it's eyeing well-heeled retail investors in Hong Kong and mainland China as it seeks to broaden its funding base.
'The World Bank has issued many bonds over the past 50 years but they were mainly bought by institutional investors. Retail investors are not that interested in bond products,' Michael Bennett, head of derivatives and structured finance at the World Bank, told the South China Morning Post in an exclusive interview. 'We would like to diversify our investor base to attract more retail investors. This is why we have to issue retail fund products.'
The World Bank already has the mandate to issue bonds in domestic currencies to set the benchmark to promote capital markets in developing countries. The funds it raises from these bond offerings are lent to those countries for infrastructure or other projects to alleviate poverty and improve living standards.
Retail funds for investors were the logical next step and Bennett was in Hong Kong last week to co-host the launch of the World Bank's second retail fund - its first was launched in Japan in 2005.
Bennett said the Japanese bond fund, issued in yen, was tailored to Japanese investors. Its second retail fund, in partnership with Bank of China (Hong Kong) Asset Management, is an emerging-market bond fund targeting retail investors in Hong Kong and on the mainland.
The BOCHK World Bank Emerging Markets Bond Fund has a China theme, and is on offer until July. It is an open-ended fund, investing 85 per cent of its assets in World Bank-issued debt securities denominated in 40 currencies of countries trading with China, including Australia, Brazil, Chile, Colombia, India and South Africa. Investing in the fund would be equivalent to investing in a basket of debt securities denominated in various currencies.