Amundi Global Dynamic Allocation Protect 90 Fund was out last week, the third guaranteed mutual fund in the SAR.
With an initial guaranteed period of five years, the maximum loss of the fund is capped at 10% of the highest net asset value per unit since inception. The estimated ongoing charges (OCF) are 1.97% per year.
The Paris-based investment team manages a similar strategy in Europe.
“Investors have lost confidence in the markets as there were many ‘black swan’ events last year, and this product is a response to their concerns,” said Zhong Xiaofeng, CEO of Amundi Hong Kong, at a recent briefing.
“More aggressive investors can also use this product as a tool for diversification, while it might also be a good starting point for people who only hold deposits in the bank,” he continued.
HSBC Guaranteed Fund, the first product of its kind introduced in 1992, is not open for new subscription anymore. The only other guaranteed product, the Man AHL Guaranteed Futures 3 Ltd Fund, launched in 2008 and was closed in 2014 after reaching maturity.
Lack of product explains why sales of guaranteed funds in Hong Kong have been minimal the past decade.
“There have been some structured products with guarantee features within the private banking space in Hong Kong, but not much on the retail side,” said Wing Chan, Morningstar’s director of manager research in Asia.
He has some reservations about the guaranteed funds. “If the fund offers a guarantee, there are costs involved. It’s like buying insurance where you pay the price for a protection.
“Fund investments are supposed to be long-term. So if investors can withstand volatility [during the guaranteed period], there’s the question of whether investors need to buy five-year protection [at all].”
Still, Vicky Kong, Standard Chartered’s Greater China and North Asia regional head of wealth management, believes there’s market demand. The bank is the sole distributor for the new Amundi product for the first six months.
“We always have clients asking whether there are any funds that offer full or partial capital guarantee,” she said.