Fixed income fixation continues in HK

At the end of September, there were 437 fixed income funds in Hong Kong compared to 412 during the same period last year, while the number of equity funds decreased to 1,021 from 1,034.

Fixed income has been a popular theme during the year, with banks such as Citi, HSBC and Standard Chartered seeing clients pouring money into the asset class.

“There has been a lot of money flowing through fixed-income themes,” Elaine Lai, head of wealth development for retail banking and wealth management for Hong Kong at HSBC, said previously. “What happened is we are seeing a lot of talk about interest rate cycle changing, so that is an area where we have to bring in a solution.”

Assets in fixed income funds increased year-on-year by 19.7% to $552.8bn at the end of September, according to the SFC.

Although the number of equity funds decreased, their assets increased and continue to dominate Hong Kong’s fund industry, accounting for 45% of the total AUM of $1.58trn.

Hong Kong’s mutual fund industry assets have had 17.4% year-on-year growth during the period.

The report also showed that passive funds as a group are failing to get traction in Hong Kong, with their number and assets declining during the period. In spite of the number of leverage and inverse products that were launched in Hong Kong, the number of passive funds decreased to 159 from 172 last year, with their assets also declining by 1.2%.

Hong Kong saw a number of firms announcing that they were delisting their ETFs due to the small number of assets they have gathered from investors. This year alone, Hong Kong had nearly 30 ETF delistings, which is more than the 26 ETFs that were delisted last year.

Hong Kong vs Lux 

The number of Hong Kong-domiciled funds continue to grow faster than Luxembourg funds. There were 56 new funds domiciled in the SAR during the period:

However, in terms of assets, Luxembourg-domiciled products dominate the industry. They hold 66% of the total NAV in Hong Kong.

But local fund structures in Asia are expected to outpace Ucits, Daniel Caleghin, head of wealth management strategy for Asia-Pacific at Deloitte subsidiary Casey Quirk, said previously. Citing data from the firm, he expects that total AUM in Asia’s fund industry will hit $11trn by 2020, with 79% of those assets in local fund structures.