Analysis Of The Operation Of The Qdii Fund And Asset Allocation Decisions

The Qualified Domestic Institutional Investor (QDⅡ) program, launched in May 2006, allows licensed domestic institutional investors to invest in overseas markets. On the early stage of QDⅡdevelopment, in order to prevent the negative impact of the cross-border short-term capital flows on economy, the government made a gradually-open-capital markets strategy. Only a limited number of institutions, with extraordinary capacity and standard operation, are allowed to invest overseas market within a certain scale of foreign exchange. Due to the rapid development on economy, the foreign exchange reserves grow accordingly. How to reduce the pressure and cost of foreign exchange reserves become the core issue of government. Trough QDⅡproduct, the investment risk of foreign exchange reserves can be diversified, and also the advantage of outstanding local institution investor can be exerted to the most. The QDⅡFund is the portfolio which issued by the licensed fund management company and invests in overseas securities market. It provides a convenient and risk-diversified method to invest abroad for local investors.From the market point of view, this paper proves the necessity of QDⅡprogram development for Chinese economic market and foreign exchange reserve management. Then, this study analyzes the micro & macro impact of QDⅡproducts on capital market. The empirical analysis, based on historical data of QDⅡfund in China, demonstrates national preference in QDⅡfund investment. Furthermore, this paper provides some suggestions about asset allocation and discusses the possibility of fund performance improving. Finally, from a broader perspective, this paper provides some recommendations for the development of QDⅡfund with historical experience.