Six ‘unicorn funds’ officially approved by China’s securities regulator

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China Securities Regulatory Commission (CSRC) on Wednesday approved the launch of six “unicorn funds,” a mutual fund focusing on investing in Chinese Depository Receipts (CDRs) which aims to facilitate overseas-listed Chinese companies to list on the A-shares market.

Each of the funds is allowed to raise up to 50 billion yuan (7.8 billion US dollars), and the lower limit is 5 billion yuan (0.78 billion US dollars).

The six fund companies are China Southern Asset Management, China Asset Management, China Universal, E Fund, China Merchants Fund and Harvest Fund.

China Asset Management Co. in Beijing Financial Street /VCG Photo

CDRs, modeled after American Depositary Receipts (ADRs), will be listed on the domestic A-shares market and settled in renminbi (RMB). As an innovative practice, CDRs serves to bring overseas-listed Chinese tech giants like Baidu and Alibaba back to the domestic A-shares market, building a bridge between China's capital market and overseas markets.

It is the first time that China has approved the “strategic allocation,” meaning that funds will raise money from retail investors as well as institutional investors in different phases. In this way, investors can secure the right to subscribe new shares at the expense of 3-year lock-up period.

Individual retail investors are allowed to subscribe to the funds from June 11 to 15, while institutional investors can subscribe on June 19.

Shi Bo, vice general manager and chief investment officer of China Southern Asset Management, said that the "strategic allocation” will open up a fresh and convenient channel for investors.