Shanghai-based Hua'an Fund Management was given a quota of US$500 million to invest under the qualified domestic institutional investor (QDII) scheme yesterday, the first fund manager to receive approval.

The State Administration of Foreign Exchange approved the licence, which allows the company to issue its US$500 million International Balance Fund to Chinese investors through the Industrial and Commercial Bank of China's network.

Assets raised will be invested in five-year terms on overseas capital markets through Hua'an with management and advisory assistance from Lehman Brothers.

Investors can subscribe to the fund, the first foreign currency-denominated QDII fund in China, with a minimum investment of US$5,000.

"The QDII fund will target a diverse range of products including global equities, global funds, real estate securities and commodities," said Yao Yulin, Hua'an's executive vice-president and chief investment officer.

He said investors' principal would be well protected when the five-year investment term is up, with a guarantee from Lehman Brothers Finance SA, a subsidiary of Lehman Brothers.

The new fund will draw its management team from both firms, with eight fund managers and researchers from Hua'an and 15 advisers from Lehman Brothers.

Chinese residents already had US$160 billion in foreign exchange deposits by the end of June and demand for more foreign exchange investment products is increasing.

China's financial authorities first allowed approved banks, fund management companies and insurers to issue QDII products to help their clients invest in overseas capital markets in April.

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