UNIT trusts are launched, promoted and recommended by reference according to their past performance, and investors pay an annual fee of one to two per cent for careful fund management - supposedly the key to strong past performance statistics. But are thedazzling past performance figures worth paying for, or are they just an illusion? The increasing popularity of index-linked funds may not provide an answer, but they may just give investors a real alternative to the more expensive ''managed'' funds.
If you compare unit trusts with each other, a two per cent management fee may seem justified. But comparing the same unit trusts against the underlying markets will give you a different perspective.
For example, fewer than seven per cent of British unit trusts have outperformed the FTA All-Shares Index over the past five years. Funds in the Japanese and North American sectors did even worse. Only five out of 25 beat the first section of the JapaneseTSE index, while none of the 37 American unit trusts beat Standard & Poor's 500 index over 10 years.
While some analysts are quick to highlight long-term advantages, they say information on index-linked funds is not easily attainable in Hong Kong. The reason is that many tracker funds made available to Hong Kong investors are still unauthorised by the Securities and Futures Commission (SFC), preventing companies from promoting or advertising fund information.
For example, Fidelity offers several funds tracking Britain, US, Japanese and European markets.
''We don't mention the funds to our clients because we do not promote them in Hong Kong but, of course, we'll answer any questions should individuals seek information about index-linked funds,'' said Ada Mak, Fidelity's director of retail marketing for Hong Kong.
