Balanced (multi-asset) funds with a global focus surpassed all other fund classes in retail sales during the last month of 2016, according to data from the Hong Kong Investment Funds Association.
Multi-asset funds basically combine asset classes into one fund which can act as a ready-made portfolio.
Retail net sales in Hong Kong
|
US$m |
Nov 2016 |
Dec 2016 |
Full-year 2016 |
|
|
Balanced funds |
Global |
80.4 |
224.5 |
538 |
|
|
Asia |
96.7 |
28.5 |
|
|
|
Others |
119.0 |
142.4 |
|
|
Equity funds |
-7.9 |
-275.9 |
-8,215.1 |
|
|
Bond funds |
-472.0 |
-1,163.5 |
10,678.4 |
|
|
Others |
3.5 |
0.36 |
130.9 |
|
|
Total |
-180.3 |
-1,043.8 |
3,132.0 |
|
Source: HKIFA
Rosita Lee, Hang Seng Bank’s head of investment products and advisory business, said multi-asset products are suitable for less sophisticated investors with low-to-medium risk appetites.
“These investors now sense that there are less opportunities in bonds, but at the same time they do not have a risk appetite high enough to turn all [investments] into equities,” she told FSA. “They would prefer this kind of allocation fund.”
She said Asian investors have tended to hold a home bias and prefer investments in the region. But that’s apparently changing, and even retail investors are beginning to see the value in portfolio diversification, she added.
High net worth investors are different, she said. A majority of HNWI in Hong Kong already have their own portfolio allocation. “Multi-asset funds, which aim to provide a handy allocation option for investors, do not really suit them.
“[HNWIs] usually have a clearer idea on how to allocate their assets into equities and bonds. Usually it would require a more personalised and tailor-made approach to constructing their portfolio, rather than relying on an existing portfolio with designated allocations.”
Global vs regional focus
There are 38 multi-asset funds with an Asia-Pacific focus and 129 that diversify globally available to Hong Kong investors, according to FE Analytics.
On average, funds within the above two categories returned 1.76% and 1.72%, respectively, in the three years ending February 2017, in US dollar terms.
However, during the same period, Asia-focused multi-asset had far higher volatility (8.41) than globally diversified products (7.45), according to FE data.
“Purely from investment perspective, global multi-asset is preferred to Asia, as there are opportunities elsewhere,” said Ruzhen Li, head of research at London-based Enhance Group.
But she added that in Asia there are obstacles to wide adoption of multi-asset funds compared to traditional equity funds. The high fees the products tend to have, lower (but less volatile) return potential, and the lack of investor understanding about multi-asset are examples.
Nonetheless, the number of multi-asset funds available in Hong Kong has increased the past few years, said Hang Seng’s Lee. She welcomes what is apparently a gradual acceptance of the products among retail investors.
“It’s a healthy trend when investors are trying to have an asset allocation rather than putting money into a single asset class or market.”
Of the 107 multi-asset funds with a three-year track record available in Hong Kong, the JP Morgan China Income Fund was the best performer, gaining 56% during the three years ending February 2017. It was followed mainly by Asia-focused products.
