SITCA urges self-control on high yield funds
13 June 2013
By Hui Ching-hoo
Taiwan’s Securities Investment Trust & Consulting Association (SITCA) has called on asset managers to be more disciplined in their pitching of high yield (HY) bond funds, according to a report from The Liberty Times on Monday (June 10).
The remarks come as HY bond funds garner an increased presence on the island. The market had amassed NT$1 trillion (US$33.3 billion) in total AUM by the end of March, compared to a market size of around NT$100 billion in 2009. The spike has prompted the regulator to conclude that the market is becoming overly speculative.
As such, SITCA has urged asset managers to temper the emphasis on the products’ high yields in their promotional material with explanations of the potential risks relating to the funds. It asserts, for instance, that the font size of the risk warnings in sales documents should not be excessively small.
Since junk bonds, bonds with credit ratings below BBB, fall into the HY bond category, the risk exposure of the HY bonds category is high compared to other credits. As such, the association closely monitors the sales processes involved in HY bond products to safeguard investors’ interests.
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