The fund industry registered record high gross sales of US$77.7 billion in 2014, according to the Hong Kong Investment Funds Association (HKIFA).
Gross inflows represented an increase of about 9.3% over 2013, whereas net sales surged by 21.4%, to US$12.5 billion – the second highest on record.
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Buoyed by the low interest rate environment and abundant liquidity, the fund industry had been enjoying steady growth in sales in the past few years.
Inflows charted new heights in 2013 and had powered on in 2014.
In the first three quarters of 2014, the industry on average registered quarterly inflows of over US$20 billion. However, the momentum seemed to have faltered towards the end of the year, with gross inflows in the final quarter dropping to US$14 billion.
This pattern was mirrored in net inflows – in the first three quarters, each quarter attracted net inflows of about US$3.7 to 4 billion. However, in the final quarter, net inflows had shrunk to US$1 billion.
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By GlobalDataA key reason was that December registered net outflows of US$1.1 billion, the first time that the industry saw monthly net outflows in 2014.
Investor interest in equity funds had started to pick up in 2013, but it was in 2014 when equity funds managed to regain its leading position in gross sales.
Equity funds took up 46.7% of the industry gross total for the full year; far exceeding the neck-to-neck second: bond funds and balanced funds. These two sector each took up about 25% of the industry total.
This reversed the trend in the previous three years, when bond funds garnered the lion’s share of the industry gross inflows.
Gross sales of equity funds reached US$36.3 billion in 2014, 59% higher than that of 2013.
Equity funds were able to attract US$6.9 billion of net inflows, up by 50% from that recorded in 2013. They accounted for 55% of the industry net total.
Most equity funds that invested in the developed markets enjoyed robust inflows in 2014. In percentage terms, European Regional market equity funds enjoyed the biggest increase – up by 296%, and recorded US$7.1 billion of inflows.
In dollar terms, it was the international equity funds which came first – they attracted gross sales of US$8.4 billion, 66% over than that of the previous year.
Eight out of the 16 equity fund categories registered net inflows. European Regional equity funds came first with net inflows of US$2.7 billion.
This was followed by Asia Regional (ex Japan) equity funds which managed to pull in close to US$2.2 billion.
On the other hand, Asian Single market equity funds recorded net outflows, at US$257 million. Emerging equity markets continued to be out of favor, with the three emerging market categories (namely Global, Eastern Europe and Latin America) witnessing net outflows.
In total they recorded aggregate net outflows of US$492 million, though this was already milder than 2013, when outflows of US$728 million were recorded.
Gross inflows into balanced funds had dropped by about 10% from 2013 to US$19.1 billion. Net inflows had witnessed a more substantial drop – by about 45% to US$5.2 billion.
Gross inflows into bond funds had also saw a drop – to US$19.7 billion, which was down by 20% from 2013.
On a net basis, bond funds managed to register net inflows, at US$541 million, reversing the trend of net outflows recorded in 2013. This was mainly attributed to strong inflows into Asian bond categories, which managed to pull in close to US$1.7 billion of new money.
European and high yield bond funds also helped to balance off the huge net outflows witnessed by Global bond funds.
Commenting on fund flows HKIFA chairman Bruno Lee said, "We are very pleased to see that retail investors have generated a record high full year gross sales and strong net sales into a well-balanced range of equities, mixed-asset and fixed income funds during 2014.
"While we are positive on the 2015 outlook of the retail fund business due to continue global recovery and sustainable low interest environment, retail investors should review their portfolio regularly and should pay more attention to the uncertainty and potential risk related to the slowdown and structural change in composition in mainland China growth rate, U.S. timing of interest rate increase, the volatility in oil and commodity prices, and the geopolitical risk."
HKIFA has 83 fund management companies as full/overseas and affiliate members. It has 46 associate members which include lawyers, accountants, trustees and other professionals that are involved in the creation and administration of funds.
