Three years of a bear market, reservations about investing in stocks and a depressed Hong Kong property market are a few of the reasons that prompted KBC Asset Management to launch its first capital guaranteed fund in Hong Kong.
KBC, an arm of the Brussels-based KBC Bank and Insurance Holding, opened an office in Hong Kong this year and launched its KBC Sunflower capital guaranteed fund in June with exclusive distribution through HSBC. The roll-out raised more than US$100 million.
The Sunflower fund matures in 2008. The fund is denominated in US dollars with a minimum investment of US$3,000. Erwin Schoeters, KBC Asset Management's Belgium-based managing director, says the fund's structure would give investors a 100 per cent capital guarantee, fixed coupons and additional return by participating in a basket of quality international corporations with high credit ratings in anticipation of a recovering market. The management fee is 1 per cent per annum throughout the 4.75 year term.
'Demand for capital-guaranteed mutual funds is a sign that interest is still focused on relatively low risk investments that will provide a better return than a number of other investments,' says Mr Schoeters.
According to statistics released by the Hong Kong Investment Funds Association, gross sales of capital guaranteed funds in Hong Kong, also known as guaranteed funds, surged from US$41.69 million in 2000 to US$3.37 billion last year.
'As long as interest rates remain low, and without a surge in the property market, guaranteed funds still serve a purpose for investors who would otherwise be depositors,' Mr Schoeters says.