Hong Kong mutual fund assets shrink

The total net asset value (NAV) of authorised unit trusts and mutual funds fell 14.8% to $1.43trn at the end of December 2018 from $1.68trn nine months earlier.

Money market funds were the only asset class to defy the trend. Their NAV rose 8.6% to $22.7bn, as higher interest rates  attracted investors.

Three guaranteed funds, which promise to pay back a pre-determined percentage of the invested capital, suffered most, with a 24.8% decline in NAV.

Among the major asset classes, equity funds were also hit badly during the market rout in the final quarter of the year. Their NAV dropped 17.5% in the final nine months of the year to $650.17bn and diversified funds – which contain equities along with other type of securities – saw their NAVs decline 14.1%.

Bond funds didn’t fare much better. Their NAV fell 13% during the final nine months to $493.95bn from $573.42bn, despite a small increase in the number of funds available to Hong Kong investors.

The number of authorised funds declined slightly, with equity fund closures matched by the opening of bond and index funds.

Notably, there was a 23.25% decline in the number of UK-origin funds, and a 39.2% drop in their NAVs to $66.51bn in December 2018 from $109.34bn nine months earlier.

Net outflows

No doubt plunging global bond and equity prices contributed to the decline in asset values. However, they were not the only reason.

Net sales for Hong Kong’s retail funds industry to the end of October 2018 were down by 93% compared with the same period in 2017, at $694m, according to data published in early January by the Hong Kong Investment Funds Association (HKIFA).

Among the different equity categories, China, Asia (ex-Japan) and Greater China funds saw the heaviest outflows, reported the HKIFA.

Authorised unit trusts and mutual funds — final nine months of 2018

Source: Securities and Futures Commission, Quarterly Report (October-December 2018)