Hua An Fund Management has sued Lehman Brothers in a Shanghai court, seeking compensation of more than US$90 million for losses incurred in an investment in structured notes guaranteed by the failed US investment bank. The Shanghai Higher People's Court heard the case on Monday but has yet to give its verdict, a court spokesman said yesterday. The International Balanced Fund managed by Hua An, one of the mainland's earliest overseas equity-based funds, lost more than US$90 million after Lehman's collapse. Hua An raised US$196.6 million for the qualified domestic institutional investor fund in late 2006 and invested nearly all the assets in structured notes guaranteed by Lehman that were linked to assets including stocks, bonds and commodities. In September last year, Hua An announced it would compensate investors of the QDII fund for the losses and reserved the right to take legal action against Lehman. It was the first case involving a Chinese QDII product and a foreign fund manager. Lehman was also a foreign adviser to the fund. Hua An was allowed to launch the mainland's first QDII fund in September 2006 on a trial basis, as Beijing took an initial step towards allowing investments in overseas equities. The fund house was granted a US$500 million foreign-exchange quota for the QDII product, but it raised less than half the target amount of capital. In mid-2007, Beijing allowed other fund managers, including China Asset Management and China Southern Fund Management, to launch QDII funds in an effort to direct capital outflows as it struggled to contain soaring inflation. The new QDII funds proved an easy sale. Mainland residents scrambled to buy into the products, attracted by a rally on the Hong Kong stock exchange. The investors were later forced to lick their wounds as the global credit crisis deepened, turning the boom into a bust.