Sales of guaranteed fund products are expected to remain buoyant for the remainder of the year, because of market uncertainties following the terrorist attacks in the United States, according to industry practitioners. The attacks will inevitably delay the US economy's recovery, which had been expected early next year by some market-watchers, thus dashing hopes of any robust stock market rebound elsewhere. An emergency-type 0.5 per cent interest rate cut by the US Federal Reserve, made before the stock market reopened on Monday, has lowered deposit rates in Hong Kong by the same amount to about 1 per cent. Guaranteed funds, which have been selling like hot cakes since early this year, should see brisk sales for a while longer, as more risk-averse investors in Hong Kong transfer their money out of bank deposits into more rewarding but riskier investment vehicles. 'Investors would for sure become more conservative amid the market uncertainties, which would see greater interest in safer products like money funds, bond funds and guaranteed funds,' said Sandra Lee Yuen-man, chairman of the unit trusts subcommittee, Hong Kong Investment Funds Association. In the first seven months of the year, guaranteed fund sales amounted to a staggering US$1.5 billion, up from almost zero for much of the previous 10 years. In the three months to June 30, the sector accounted for about 69 per cent of total fund sales in Hong Kong. But fund managers caution that guaranteed products are not for everyone. They are most suited to the needs of risk-averse investors who have a long investment horizon. Fund-switching when market conditions change could be expensive because of hefty redemption charges, especially early in the lock-in period, which lasts three to four years. Investment returns may be guaranteed only upon completion of the entire lock-in period, which means investors may be vulnerable to losses in case of early redemption, should the net asset value of the funds fall below their original values. Investors may also lose out on some of the profit potential of the markets, as generally about 80 to 90 per cent of guaranteed funds are invested in fixed-income instruments, with the remainder in equities. Roger Pyrke, Asia director at Barclays International Funds, which does not sell guaranteed funds, said he advised clients not to put too much of the money they had available for investment into these products. 'Obviously, when the stock market recovers, hopefully in the next 12 to 18 months, investors would want to be able to take advantage of that,' Mr Pyrke said.