“This forward looking index will help the investment community understand projected investor appetite and potential asset allocation in key markets in Asia,” said Eastspring chief executive Guy Strapp.
“The research provides important insights into what current and intending fund investors are planning and allows the industry to meet their needs through the development of appropriate products.”
The index measures mutual fund investor appetite on a scale of 0 to 100 with 0 being income exposure and 100 growth exposure. With a score of 45, the index currently indicates investors’ intention to shift toward income funds in the next six months.
The result was arrived at on the basis of 1,501 interviews conducted in Hong Kong, Singapore, Malaysia, Taiwan and Korea in July 2013.
“The index shows that Asian investors are continuously searching for yield. The findings also indicate they are investing in products other than bond funds to acquire regular income,” said Alvin Chiu, head of marketing at Eastpring.
Eastspring Investments Growth & Income Index is the industry’s first index, claims the asset manager, expecting it to become an annual barometer of the intentions of mutual fund investors.
The asset manager also revealed the findings of its inaugural mutual fund investor behaviour study, which showed Asian high dividend equity and Asian bond funds currently topping income fund ownership ranking among investors at 37% and 32%, respectively.
Over the next six months, holdings of Asian bond funds and emerging markets debt funds are likely to be replaced by multi asset income, equity income and high yield funds, revealed the study. It also showed an intended increase in ownership of global themed income products in selected markets, especially in Malaysia and Korea.
Asian mutual fund investors have about one third of their assets in mutual funds, followed by cash and stocks. The survey reveals that investors in the five markets on an average allocate 45% of their mutual fund portfolio in their home market and 85% of them invest in mutual funds through regular savings plans.
In Malaysia and Korea, investors tend to allocate a much larger proportion of their mutual fund assets in the home market. In Taiwan, however, investors generally have very geographically diverse mutual fund portfolios, and prefer to review their portfolio every nine months on average.
Amid improving equity markets, the study found that there is an increased confidence in stocks across most markets. A slight drop in confidence level in real estate in the next six months was observed for Hong Kong, Singapore and Malaysia.
The biggest concern for investors is inflation, which ranked higher than a possible slowdown in China’s economic growth and uncertainty in the eurozone.
The survey shows investors are hunting for yield but it also raises the question of whether they really understand their investments, according to Chiu.
The study revealed there is a need for investor education, with only 21% of income fund investors claiming they fully understand the risks involved in income fund investments, he said.
Alarmingly, 46% of them incorrectly agreed that all bond funds are similar and low risk.
They are most likely to seek information from newspapers, magazines and online sources, Eastspring said.