Definition
The Qualified Domestic Institutional Investor (QDII) program, also known as the Qualified Domestic Institutional Investor (QDII) program, is a capital market plan that allows financial institutions to participate in offshore markets such as equities and bonds. Comparable to QFII, it is a transitional arrangement that provides limited opportunities for domestic investors to access foreign markets when a country’s currency is not traded or floated completely freely and when capital is not able to move completely freely in and out of the country at the time of the transition.
What is ‘Qualified Domestic Institutional Investor – QDII’
An institutional investor that has met certain qualifications to invest in securities outside its home country. The most popular QDII program comes from the People’s Republic of China, where the main regulatory body (the China Securities Regulatory Commission) may grant a limited avenue for institutional investors such as banks, funds and investment companies to invest in foreign-based securities.
The overall restrictions on ownership are in place for several reasons, including currency conversion concerns in nations where the currency is not free-floating.
Explaining ‘Qualified Domestic Institutional Investor – QDII’
QDII programs are used in places where the capital markets are not yet completely open to all investors. For example, any institutional investor in China that obtains approval to be a QDII may invest up to 50% of net assets into allowable foreign securities, so long as not more than 5% is invested in any one security. Only certain foreign markets are eligible for investment, including Britain and Hong Kong.
The QDII program in China was set up partly to provide the growing number of domestic investors with a place to park their funds; only a few hundred local stocks are listed on the Shanghai and Shenzhen stock exchanges.
Qualified Domestic Institutional Investor (QDII) FAQ
What qualifies as an institutional investor?
An institutional investor is a business or organization that makes investments in the interests of other people or organizations. Mutual assets, pension funds, and insurance companies are just a few examples.
Is a trust an institutional investor?
Investment businesses, insurance companies, investment banks, commercial trusts, endowment funds, hedge funds and certain private equity investors are examples of institutional investors. The funds that institutional investors use do not include any funds that they have personally invested in.
What is meant by institutional investors?
An institutional investor is a business or organization that makes investments in the interests of other people or organizations. Mutual assets, pension funds, and insurance companies are just a few examples.
Who are domestic institutional investors?
Institutional investors in the United States include organizations such as insurance companies, mutual fund houses, pension funds, and provident funds. A DII is a financial institution that pools money from small investors in a nation and then trades in a variety of securities and assets in that country.
Further Reading
- What are the challenges and problems facing china’s outward portfolio Investment? evidence from the qualified domestic institutional investor scheme – www.emerald.com [PDF]
- China’s Capital Flow Regulations: The Qualified Foreign Institutional Investor and the Qualified Domestic Institutional Investor Programs – heinonline.org [PDF]
- Managers’ Overseas Connections and Investment Preference: Evidence from China’s Qualified Domestic Institutional Investor (QDII) – en.cnki.com.cn [PDF]
- China’s outward direct and portfolio investments – onlinelibrary.wiley.com [PDF]
- The dynamics of financial market integration between Chinese A-and H-shares – www.tandfonline.com [PDF]
- Impact of financial market liberalization on PE ratio: a study on China A-share market – dr.ntu.edu.sg [PDF]
- An update on China’s derivatives market – jsf.pm-research.com [PDF]
- An Empirical Analysis on the Portfolio of QDII Fund and Greenhouse Gas Emission Permits – ieeexplore.ieee.org [PDF]
