Gross sales of Hong Kong’s registered funds hit record high in 2013

20 February 2014   Category: News, Asia, Global, Hong Kong   By Asia Asset Management

Hong Kong’s fund industry registered a growth of 30% in gross sales for 2013 to hit all-time high of US$71 billion, despite sales dropping by 27% to $10.3 billion on a net basis, according to the Hong Kong Investment Funds Association (HKIFA).

The association stated that the industry registered net outflows of $1 billion last December, the highest monthly net outflows since 2008. The net outflows were mainly attributable to a slowdown in gross sales rather than a surge in redemptions. Compared with November, December saw a drop in grow sales by 46% to $3 billion. Also, the industry witnessed redemptions of $4 billion, down by 22%.

In terms of performances, although bond funds still managed to come first in terms of gross sales, accounting for 34% of the industry gross total in 2013, the proportion declined significantly compared to the ratio of 67% in 2012. The share of equity funds and balanced funds represented 32% and 30% of the industry total respectively, reflecting a more balanced mix in terms of sales in 2013.

Gross sales of bond funds dropped to $24.4 billion, a decrease of 34% from the previous year, which sharply contrasted to the net inflows of $13.5 billion registered in 2012. Bond funds saw net annual outflows for the first time since 2007 of US$3.6 billion. Amongst the various bond categories, only Asian bond funds and European bond funds managed to attract net inflows, at $844 million and $23 million, respectively.

The HKIFA pointed out that investors had started to warm to equity funds, especially since the middle of the year. Gross sales of equity funds reached $22.9 billion, 1.2 times higher than that of 2012. The funds were able to attract $4.6 billion of net inflows, reversing the trend of 2012, when net outflows of $1.2 billion were recorded.

Balanced funds had a spectacular year with gross sales reaching $21.3 billion, an increase of 2.7 times over 2012. Although inflows had slowed down in the second half of the year, they managed to surpass equity funds and bond funds to come first in terms of net sales – registering $9.4 billion of inflows for the year.

The HKIFA’s chairman, Lieven Debruyne, noted that: “Even though 2013 has turned out to be another record year with over $70 billion in gross sales, net sales of investment funds had a much more difficult final month of the year compared to previous months with December showing the largest net outflows in a single month for five years.

“This slowdown however comes on the back of two years of extremely strong growth in mutual fund sales. The trend of increased demand for equity funds at the cost of bond funds continued, with equity funds seeing net inflows with the exception of emerging market equity funds.  Demand for yield in the current low interest rate environment helped sales of balanced funds particularly, as many of these funds provide a regular pay out.”

Bruno Lee, HKIFA unit trust subcommittee chairman, added: "While retail investors should be aware of the risk associated with market uncertainty caused by the US tapering and challenging economic situation in selective emerging markets, the current low short-term interest environment and continued global economic recovery, particularly in the developed economies, should provide good opportunity for asset rebalancing and long-term positioning for achieving investment goals."