In the first nine months of 2014, the fund industry registered gross and net sales of US$63.2 billion and US$11.5 billion respectively, according to the Hong Kong Investment Funds Association (HKIFA).
Compared with the corresponding period in 2013, gross and net sales went up by 12% and 7.5% respectively.
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In terms of both gross and net sales, equity funds came first on a year-to-date ("YTD") basis. Gross inflows reached US$29.4 billion, accounting for 46.5% of the industry gross total. They represented an increase of 94% over the same period of last year. Net inflows had also soared – surging from last year’s US$2.9 billion to US$6.3 billion. They garnered the lion’s share by accounting for close to 55% of the flows.
Gross inflows into bond funds and balanced funds were each at about half of that registered by equity funds: bond funds attracted US$16.6 billion, whereas balanced funds took in US$15.1 billion, accounting for 26.3% and 24% of the industry gross total. Both represented a drop from 2013: a drop of 22% for bond funds and 16% for balanced funds.
On a net basis, inflows into balanced funds had plunged from US$9.7 billion last year (Jan-Sept) to US$3.6 billion YTD. Bond funds had fared better – whereas last year (Jan – Sept) this category witnessed net outflows of about US$2 billion, the tide had turned this year and it managed to attract robust inflows of US$1.6 billion.
Commenting on fund sales of 2014, Mr Bruno Lee, Chairman of the HKIFA said, "the healthy growth in gross and net retail fund sales this year reflects continuous improvement in retail investor sentiment under the backdrop of stable recovery of global economy, low inflation and exceptional low interest rate environment, despite uncertainty in geopolitical risk throughout 2014. While growth in equity funds demand is particularly strong, we continue to see significant demand in income oriented funds investing in fixed income and equity income underlying securities.
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By GlobalData"As we are approaching the end of this year and the new year soon, we would encourage retail investors to examine their annual portfolio review by monitoring their 2014 fund performance and overall investment asset allocation against their long-term investment objectives as well as the various potential investment opportunity and risks to prepare for the appropriate action need to be made in the coming year."
Equity funds
Out of the 16 equity categories, eight registered net inflows on a YTD basis. European regional equity funds came first by attracting US$3.2 billion of inflows, followed by international equity funds which attracted US$1.9 billion. Asia Regional (excl Japan) equity funds came third with US$1.1 billion.
These were also the top three sectors on a gross basis, though the ranking was slightly different. International equity funds ranked first with US$7.5 billion of gross inflows, up by 1.6 times over the same period of last year. European regional equity funds came second with US$6.7 billion, 10 times over 2013. Asia Regional (excl. Japan) equity funds came third with US$4.7 billion, up by 57%.
But it seemed that interest in international equity and European funds had waned in August and September. Gross inflows in the last two months were only about half of the previous months. Instead, interest in Asian Regional (excl Japan) funds had picked up in Q3 with gross inflows tripling that of Q2 and reached US$3 billion.
Balanced funds
While total inflows into balanced funds paled in comparison with last year, gross inflows remained healthy and on a quarter-by-quarter basis, we saw steady increase. First quarter gross inflows were at about US$4 billion, and this rose to close to US$5 billion in Q2; and further to US$6.2 billion in Q3. On a net basis, the increase was more marked – from about US$39 million in Q1 to US$915 million in Q2; and soared to US$2.7 billion in Q3.
Bond funds
Out of the six bond fund categories, high yield bond funds came first in terms of gross and net sales by registering US$9.1 billion and US$1.8 billion respectively on a YTD basis. This reversed last year’s trend, when net outflows of US$569.6 million were registered. But most inflows were registered in the first half of 2014; and in August and September, the high yield sector saw very heavy outflows, totaling at US$1.4 billion.
Asian bond funds had also come into favor, taking the second position on a gross basis YTD, at US$3.9 billion. And it also came second on a net basis, and it was the only category that managed to consistently register net inflows in the past five months.
As for the outlook of fund sales for the coming year, Mr Terry Pan, Vice Chairman of HKIFA said, "If the trajectory over the past few years is a good indication to use, the mutual fund market in Hong Kong will continue to look very attractive in 2015. From an investment perspective, the recovery of global economies – whilst they are at different stages – should continue to support a positive investment appetite that mutual funds provide. The capital market developments such as the HK-Shanghai Stock Connect and the potential Mutual Recognition of Funds between HK and Mainland China are also supportive of further market development."
"As an industry, we are keen to continue to help the investing public to improve their knowledge around the benefits of mutual funds, especially the diversification benefits and the importance of understanding their own risk-return profile in order to find the right investment and create a properly diversified portfolio."
HKIFA has 64 fund management companies as full/overseas members, managing about 1,200 SFC-authorized funds. Assets under management were at approximately US$1,025 billion as at the end of September 2014. In addition, we have 63 affiliate and associate members.
