SFC-authorised fixed maturity products (FMPs) that were launched this year in Hong Kong attracted around $1.55bn of net inflows from investors, according to a report from Boston-based consultancy firm Cerulli Associates.
The data only included net inflows from five products that were launched before September, the report shows. After that, seven more FMPs were launched in Hong Kong, according to data from Hong Kong’s Securities and Futures Commission.
Leading the inflows is HSBC Global Asset Management’s GIF Global Corporate Fixed Term Bond 2022 Fund, according to the Cerulli report. Launched in June, the product had net inflows of $835.7bn, accounting for 53% of the total inflows into the new FMPs in Hong Kong as of the end of September. Last month, the firm also rolled out three more FMPs.
Following HSBC, two products from Invesco had the second and third highest net inflows, which collectively attracted $553.7m from investors, according to the Cerulli report. The firm’s first retail FMP in Hong Kong was launched in July and gathered around $300m. The firm also recently launched its third retail FMP in the SAR.
Firms that have launched retail FMPs in Hong Kong
Number of FMPs launched
|BEA Union Investment||
|HSBC Global AM||
|Hang Seng Investment Management||
Source: Securities and Futures Commission. As of 25 November 2019
Singapore and Taiwan
The Cerulli report noted that FMPs launched in Singapore and Taiwan also attracted huge inflows from investors this year.
In Singapore, three FMPs gathered $717.4m, with Schroder’s Fixed Maturity Bond Portfolio 2023 gathering the highest inflow of around $344.1m (to September).
In Taiwan, investors poured around $1.47bn into six FMPs, with an Eastspring product leading the inflows of around $360m.
“Fixed-maturity plans witnessed considerable demand [across Asia] last year, and continue to receive interest in 2019 as distributors have been keen to onboard such plans,” the report said.
It also noted that the FMPs offered in the region, especially in Hong Kong and Singapore, have shifted their investment focus to Asia and emerging market bonds as the asset class has offered better yields compared to developed market bonds.
In Hong Kong, seven out of the 12 retail FMPs launched this year are focused on Asia, according to data from the SFC.
However, the popularity of FMPs has also attracted attention from regulators, Cerulli noted. Taiwan’s Financial Supervisory Commission, for example, expressed concerns about the overemphasis on “guaranteed investment returns” and “higher interest than savings” that such products have claimed. The regulator also barred the launch of at least two FMPs in a row, the report said.
In Thailand, where FMPs have also become popular, the Securities and Exchange Commission in July released a consultation proposing changes to the sales and management of fixed-term funds, according to a statement from the regulator.
The proposed changes targeted both fund managers and distributors to disclose more information about the product risks, as investors often perceive them as deposit products with an expected fixed return and may not be aware of their underlying risks.
FMP demand to slowdown?
Cerulli believes issuance of the products could slow.
“With market expectations of a rate cut from the Federal Reserve, it is likely that the pace of FMP launches could slow down, although a few more such launches to lock in high yields before a potential rate cut cannot be ruled out.
“However, the right product timing is key to raising assets in FMPs, especially given the easing rate cycle,” it said.
Separately, Ken Yap, managing director for Asia at Cerulli, noted in the report that income-focused products, which have also become popular, should continue to gain traction given the uncertain market conditions and conservative investor sentiment.
“As risk appetite improves, investors could look for some income-generating assets, such as equity-income and income-offering multi-asset funds,” he said.
The report added that in Asia, distributors see features such as regular and steady income payments, capital protection and low volatility as the most important product features for investors.
“As such, income-oriented products will be the mainstay.”