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HK fund selectors prefer multiasset class

Fund selectors in Hong Kong are betting on investments in multi-asset classes to boost returns in the current low yield environment.

When asked to choose an investment strategy for their own money for the next 12 months, 52% fund selectors voted in favour of multi-asset class followed by equities with 38% of the vote.

This was the outcome of live voting conducted at the recent Fund Selector Asia Forum held in Hong Kong, where delegates were polled on a series of questions ranging from business and client expectations, to the market outlook across different asset classes.

Only 5% preferred bond investments, clearly indicating concerns over downside risks in a possible rising rate scenario, with speculation rising on when the US will end its quantitative easing programme.

Nearly 90% of the delegates expect the US Federal Reserve to reduce the size of the monthly bond-buying programme in the 12 months, while about 11% predict the Fed to halt the entire bond-buying programme.

Fund selectors are broadly bullish on the macro-economic outlook for the global economy, receiving 65% of the votes, but surprisingly 53% of them shared a neutral view on their own business. None were bearish on their business.

In terms of market strategies, fund selectors appeared to be turning positive on global equities, with nearly 80% expecting to increase the allocation to this class, while nearly 18% are holding it as stable.

The optimism on equities appeared to be on the back of an improving outlook in the European region and a positive view on the US, as the world’s largest economy heads towards a steady revival.

With respect to equity income strategies, nearly half of the sample size favoured keeping the allocation unaltered, with 27% preferring to add and 23% wishing to decrease allocation.

Even in case of high yield investments, a majority of 60% wanted to maintain their current allocation, while a third wished to enhance exposure and only 7% wished to trim investments.

The voting pattern revealed clients becoming more risk averse, possibly due to the uncertain and extraordinary conditions witnessed over the last five years since the start of the global financial crisis.

According to fund selectors, a typical client would wish to minimize the risk of losing his money during market falls (securing 70% of the votes), rather than wishing to capture the upside when markets move positively (29% of votes).

Interestingly, all kinds of investment objectives such as income, capital growth and wealth preservation received more or less equal votes.

However, in terms of return expectations, fund selectors felt their high-risk tolerant clients would prefer a return of 15% to 25%, with nearly 56% votes, while a third said clients expect between 10% to 15% return and 10% said clients anticipated returns of more than 25%.

Part of the Mark Allen Group.