The much-hyped Tracker Fund of Hong Kong (TraHK) has failed to create any ripples in the fund management industry in the SAR, with most fund managers giving the product a lukewarm response. Several fund managers said TraHK, a closed-end fund, was unlikely to create the same impact on the industry as the Government's intervention in the market in August last year when it bought shares worth $118.13 billion. 'There is a lot of hype surrounding this product mainly because of its sheer size,' said Alastair Murray, managing director of the Bank of Butterfield. Mr Murray said there was nothing new about the fund, as it was 'just another index tracking fund'. 'It is a boring, dull product and not very exciting,' Mr Murray said. TraHK comprises shares from all 33 constituents of the blue-chip Hang Seng Index. Fund managers said local retail investors favoured equity investment over unit trusts. According to figures provided by the Hong Kong Investment Funds Association (HKIFA), the penetration rate for unit trusts was just 3 to 4 per cent of the adult population that invested in funds, while direct investment in equity was 15 per cent of the investing public. 'Converting non-investors to become investors would take a long time. People have to be made comfortable with the product,' HKIFA senior executive manager Sally Wong said. 'Frankly, there has never been an appetite for Hong Kong funds. People tend to invest more in mutual funds,' Roger Pyrke, director at Barclays Global Investors said. Mr Pyrke said investors in Hong Kong tended to play up the market rather than go for investment in an index-linked instrument. 'People feel that it [the fund] would suck the liquidity [from the market],' Mr Pyrke said. A fund manager at a European fund management company said that if the size of the fund were bigger, it would have to compete with a corporate sector trying to raise money for development and investment, which would further drain available liquidity. 'Another main issue is that some fund managers may divert their portfolio to this fund, thus depriving the market of that money,' Mr Murray said. Fund managers said it was going to be difficult for the Government to convince offshore institutional investors to go for TraHK. They said an investment house would not be attracted to a passive fund. 'Institutional investors have more sophisticated ways of hedging exposures than simply buying a tracking unit trust,' the fund manager at the European securities house said. Fund managers have mixed views on the timing of the funds launch. 'Certainly, the signs of growth are there in the economy. If the market goes up, people would say that the Government sold out cheap, if it goes down then again people will comment. There are no winners as far as predicting the market timing is concerned,' Mr Pyrke said. Mr Murray said many people would go for the fund for the wrong reasons such as discounts, but it would be well received by the market. Ms Wong of the HKIFA said the organisation would launch an educational and promotional campaign to enhance the people's understanding of the operation and benefits of collective investment instruments.