The total AUM of funds registered for sale in Hong Kong grew by 29.4%, with similar gains across the main categories: equity funds, bond funds and diversified (mixed-asset) funds. The AUM equaled $1.66trn at the end of 2017.
Notably, Hong Kong investors sold some of their equity holdings in Hong Kong-domiciled mutual funds throughout 2017, and bought bonds and mixed-asset funds.
In a year when markets were generally strong, hedge funds were the big loser.
ETF de-listing
While the number of funds registered for sale in Hong Kong grew slightly across most categories, the notable exception was index funds, which include exchange-traded funds (ETFs), and among those, leveraged and inverse ETFs. The number of SFC-authorised index funds declined to 155 at the end of 2017, from 170 at the end of 2016. It was as high as 182 in March 2017.
Many ETFs were delisted from the Hong Kong Stock Exchange in 2017, deemed unattractive to investors due to their low liquidity and comparatively high cost. ETF providers were reluctant to launch new products as they waited for clarification of criteria for inclusion into the ETF Connect scheme, which has had its launch delayed.
At the end of 2017, Hong Kong investors had access to 2,789 SFC-authorised collective investment schemes. The total included 2,205 mutual funds and unit trusts, while the remainder consisted of investment-linked assurance schemes, MPF schemes, MPF pooled investment funds, pooled retirement funds, paper gold schemes and REITs.
The number is only marginally higher, by 9 products, or 0.4%, than the number of products for sale in the territory at the end of 2016.
Source: Securities and Futures Commission
Domicile competition
Hong Kong-domiciled products continue to gain ground on Luxembourg products. Hong Kong-domiciled funds accounted for 34% of all mutual funds and unit trusts registered for sale in the territory. The number is slightly up from 32% at the end of 2016. The effect is partly due to a decline in Ireland-domiciled products and to re-categorisation of some funds’ domiciles.
Luxembourg-domiciled funds still dominate the offer, constituting 46% of the SFC-authorised products. However, year-on-year growth was far slower than Hong Kong domiciled products.
The SFC report added that 50 mainland funds approved by the SFC under the Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme were for sale to local investors at the end of 2017. Only ten Hong Kong-domiciled funds have been approved for distribution in mainland China under the same scheme.
