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SCMP Reporter

FIDELITY Investment is making a fresh attempt on the main stream of unit trust and mutual fund retail sales in Hongkong with new, apparently user-friendly services for local investors.

  The group has been in the territory since the early 1980s and has in the past four years consistently maintained a high profile in the retail market.

   The group has now expanded its product range offered in the region, along with local fund management capability.

  As a sector, the retail fund industry is in flux with the hegemony of more established local names like Jardine Fleming Unit Trusts being challenged for sales by new entrants - especially Citibank.

  Fidelity has launched the territory's first 24-hour, computer-assisted fund information service for clients in Hongkong, Singapore, China and Japan.

  Apart from Jardine Fleming, Fidelity is the only investment fund manager with an operation in the territory to make a major overture to the mass retail market.

  Unit trusts and mutual funds are pools of retail investors' money, under the management of a professional fund manager, protected under trust or some legally binding agreement.

  In the mid-1980s Jardine Fleming was the first unit trust management group to recognise the potential of the retail market in Hongkong as Asian investors tend to have some of the highest savings ratios in the world and their wealth accumulation is frenetic.

  The October 1987 Wall Street crash battered many retail investors who had invested near the highs of stock markets around the world in the weeks and months ahead of the crash.

  Since then Invesco MIM Asia, Wardley Investment Services, Scimitar and Gartmore, along with intermediaries Matheson PFC and Connaught Investment, have attempted at one time or another to achieve a surge in sales growth in the retail market.

  Yet the unit holder base of the industry has remained doggedly at only two per cent of the population while insurance has grown from five per cent to 20 per cent of the population.

  According to Mr Richard Wastcoat, marketing director at Fidelity Investment, the day of the unit trust or mutual fund might have come in Hongkong.

  After intensive research and a review of corporate strategy, following a number of well publicised slip-ups elsewhere in the region, the group decided to break away from the traditional intermediary-led unit trust sales business.

  To tap the mass retail market, the group - along with a number of competitors - most notably Wardley and Jardine Fleming, has secured distribution deals with the bank branch networks of Citibank, Chase Manhattan and First Pacific Bank.

  It is negotiating with groups under the Bank of China umbrella for similar distribution rights. However it is excluded from the Hang Seng Bank franchise which contains Jardine Fleming, Schroders Asia and Wardley.

  Mr Wastcoat said the group's research found there was investor ignorance of unit trusts and many felt these products were inaccessible to them.

  ''We have tried to remove some of the obstacles in the way of enabling investors to get information about funds,'' he said.

  FAST, Fidelity's automated service telephone, will operate 24 hours a day as a computer-assisted information source, offering fund detail on a free phone basis to investors in Hongkong, Singapore, China and Japan.

  In addition, the group is extending the hours when clients can transact business to 9 pm.

   ''We found many individuals in Hongkong were too busy in the day to deal with fund matters, so we extended our service into the evening when people have more time,'' said Mr Wastcoat.

  Eventually, the dealing service now available on a restricted basis during the day will operate 24 hours alongside the information service.

  The information service will give fund prices and handle account balance and statement requests, generic fund information and application form requests.

  Mr Wastcoat said Fidelity's survey work found that too much attention in the past had been paid by fund management groups to investment performance and the production of high-risk, niche product lines.

  ''Alongside good investment performance, people demanded a high quality of service and good distribution,'' he said.

  A competitor who did not want to be named said: ''The importance of this is that at least one fund manager has said publicly that it is now prepared to devote important resources to the retail market in Hongkong.''   Its competitors, apart from Jardine Fleming, had tended to maintain a token advertising spending profile and little else, he added.

  The development of Citibank's Investment Service in January last year has forever changed the shape of the Hongkong retail investment industry.

  In less than 12 months the group, according to competitors, became the largest sales agent for funds in Hongkong by selling a choice of funds from competing fund managers to clients in return for commission.

  Citibank offers its investment service as a package with a range of 168 funds and a number of insurance providers. Through computer profile searches of the bank's client base it identifies suitable clients and approaches them from one of 14 branches in Hongkong.

  After an investigation into the client's financial services along with a risk tolerance profile of the client's investment perspective, the bank offers a range of investment opportunities to match each client's circumstances.

  A number of banks, including HSBC, are planning to follow Citibank's lead in this service provision, which takes in foreign exchange services and personal borrowing needs.

  Traditionally, practitioners have suggested fund industry trends would take fund development into new, highly sophisticated product areas as marketing became more niche oriented.

  While this might be true for the traditional expatriate and high-net-worth biased intermediary sector in Hongkong, it is apparent that a significant percentage of sales is going to be achieved through the distribution of ordinary class products in mass distribution channels.

  While the one-stop financial services concept of the 1980s is now a discredited goal for groups, it is apparent that banks are set to be an important agent of sales through highly specialised targeting of their bank-account client bases.

     For the banks, commission sales can be achieved which in the long run can generate important revenue on a recurring basis while staying free of being hostage to one in-house product line.



Fidelity in unit trust sales push