One of the mainland's earliest overseas equity-based funds is facing a severe loss, a victim of Lehman Brothers' collapse, as the qualified domestic institutional investor product held a large amount of structured notes guaranteed by the failed bank.
Shanghai-based Hua An Fund Management said yesterday that its International Balanced Fund, the country's first QDII product managed by a fund house, was taking a huge blow from the potential liquidation of Lehman because some assets it held were issued by the investment bank.
Redemptions on the fund had been suspended since Hua An was unable to assess the value of the product after Lehman filed for bankruptcy protection, the firm said.
The structured notes managed by Lehman are linked to assets including stocks, bonds, and commodities.
The firm did not reveal the amount of assets at stake, but an industry insider said most of the fund, valued at US$97 million by June 30, was invested in the structured notes guaranteed by Lehman, also the foreign adviser of the QDII product.
Hua An was granted a US$500 million foreign exchange quota to launch a QDII fund in September 2006, when six fund managers and analysts from Lehman joined the management team.
However, it received a lukewarm response, raising less than half the targeted capital or US$196.6 million.