THE best performing unit trust fund sector last year was in Australian dollars, according to figures from the Hong Kong Investment Fund Association (HKFA). Equity markets and bond funds slumped amid fears that the United States Federal Reserve would raise interest rates in February. Meanwhile, in November, the exodus of retail money from unit trusts accelerated to reach US$76 million, the second biggest monthly redemption figure in 1994. It turned the 11 months ending November 30 industry sales total to an $8 million net redemption. Instead of taking the risk attached with investing in the equity markets, investors would have done better to sit on their hands in cash as money market funds took four of the top five performing slots in 1994 and eight of the top 15 slots. Investors in Hong Kong already knew that Hong Kong equities were in the worst performing stakes last year, as the Hang Seng Index fell by 32 per cent. What they probably might not realise is that they would have made, in United States dollar terms, 18.8 per cent last year, sitting in the Australian dollar money market funds. The deutschemark money market funds ranked second, up by 16.9 per cent. The Swiss franc funds ranked next, up by 16.78 per cent. The only equity fund to make it into the top five was Japanese equities, up 15.66 per cent over the period. In fund sales, the stream of money exiting the industry increased in November. Net redemptions were $76 million, the second highest at monthly outflow of the year. It was the third successive month of redemptions, taking the total redemptions for the year to $8.16 million. Association chairman Roger Pyrke said, 'The year started off with robust sales, following from the record high inflow registered in the last quarter of 1993. 'As worries of further interest rates rises still linger, we would expect 1994 to have an overall outflow.' Mr Pyrke said that the only positive aspect of the figures was that gross activity was up strongly year on year. Gross sales were up overall to $3.59 billion, a record amount. Gross redemptions were up to $3.6 billion, another record. The biggest activity was in the Asia-Pacific region, where redemptions hit $79 million, in line with previous redemption months. All sectors saw net redemptions. During the period for the 11 months ending on November 30, net redemptions appeared in Hong Kong, Asia-Pacific and bond funds. 'Even though there was a net outflow over the period to the end of November it did not occur across the board,' said Mr Pyrke. Japanese, European, North American and international equity sectors, along with the cash funds, managed to register net inflows, said Mr Pyrke. He said that the fortunes of the industry in Hong Kong would only improve when the performance of Asia-Pacific funds improved. He added that the association would be in talks soon, with the Securities and Futures Commission, regarding the regulator's stance taken on rebate commission in 1994. Mr Pyrke said he hoped that in the future, mainland organisations linked to the industry would join the association. The association has 45 fund management groups with more than 500 funds surveyed in the sales and redemption figures.
