Investors shun guaranteed funds despite low rates
Raymond Ma and Kirsti Hastings
Despite a prevailing low interest rate environment, Hong Kong saw a flow of investment dollars from guaranteed funds into cash and equity funds last year, according to statistics.
However, industry practitioners were adamant guaranteed funds remained popular last year, with some claiming their sales rose.
Data from the Hong Kong Investment Funds Association (HKIFA) has shown that gross sales for guaranteed funds by investors fell 11.28 per cent to HK$3.38 billion last year from HK$3.81 billion in 2001.
Gross sales of cash funds shot up 37.4 per cent to HK$1.85 billion, and equity sector funds rose 72.7 per cent to HK$1.44 billion.
Total funds sales also rose 33.6 per cent to HK$12.65 billion.
'I need to acknowledge that there is a limitation in our data, because we do not cover all fund managers but only 80 per cent,' HKIFA executive director Sally Wong said. 'Some companies . . . launched a lot of guaranteed funds and these were not captured.
'In talks with distributers, they have said that guaranteed funds still play a dominant role.'
Both Hang Seng Bank and SG Securities (HK) yesterday said their sales in this sector rose last year.
Guaranteed funds became popular because they promise that at least the principal investment will be repaid at maturity.
This comes when global stock markets have lost ground, with some equity-linked investments delivering negative returns.
Interest rates - particularly for savings - have dropped, meaning massive cash piles in banks would earn almost nothing. However, many have speculated their demise as an investment vehicle if interest rates rebound.
HSBC, which launched a capital guaranteed fund, seems not to share this sentiment. Executives said demand remained strong.