Assets of authorised mutual funds in Hong Kong fell 12.6% to $1.37trn as of the end of March from $1.56trn over a 12-month period, according to Securities and Futures Commission’s latest annual report.
Equity funds were hit the most, with their assets falling 20.77%, followed by fund of funds (-20.68%) and mixed asset products (-16.49%). Meanwhile, the decrease in assets of bond and money market funds were only 6.88% and 4.8%, respectively.
Only assets of passive funds, which include ETFs and leveraged and inverse (L&I) products, increased during the period, rising 23.96% to $119.2bn, according to the report.
Authorised unit trusts and mutual funds by type
The regulator noted several developments in Hong Kong L&I market during the period, which include the relaxation of the leverage cap for inverse products to a factor of two-times negative (-2x), as well as streamlining requirements to allow an SFC-authorised feeder ETF to invest in an eligible overseas master ETF on a case-by-case basis.
As of the end of March, assets of L&I products in Hong Kong increased 10% to HK$7.47bn ($1bn) from March last year, according to data from the Hong Kong Exchange.
The decrease in overall assets within the industry comes at a time when investor sentiment has soured amid the coronavirus pandemic. During the first quarter, SFC-authorised funds had net redemptions of $5.23bn, according to data from the Hong Kong Investment Funds Association.
Hong Kong-domiciled funds climb
Separately, in terms of fund structures, Luxembourg-domiciled products continue to dominate the industry, accounting for nearly half of the 2,135 SFC-authorised funds in Hong Kong, according to SFC’s annual report. In terms of total assets, Luxembourg-domiciled funds account for 64.8% of the industry.
However, the share of Hong Kong-domiciled funds in terms of both their number and assets climbed during the period.
Authorised unit trusts and mutual funds by origin
The SFC noted that it has been focusing efforts in developing Hong Kong to become a global and asset and wealth management centre and preferred fund domicile. Following the launch of the open-ended fund companies (OFC) regime in 2018, the regulator said in the report that it proposed some changes last year, including expanding the investment scope for private OFCs and allowing securities brokers to act as their custodians.
In total, there have been six OFC launches, including a fixed income product managed by BEA Union Investment and three ETFs by Mirae Asset Global Investments.
Separately, the regulator also said that it is actively involved in the government’s taskforce on establishing a new limited partnership regime for funds, providing tax concessions for local private equity funds’ carried interest and other initiatives.
