With the first major tranche of guaranteed funds maturing soon and interest rates at a 40-year low, many companies are restructuring their product lines to satisfy safe-haven investors who have developed a thirst for higher returns
If the sales and marketing managers at Hong Kong's many fund companies are walking with a spring in their step these days, it could be because they are eyeing a billion-dollar jackpot.
Over coming months beginning in May, an estimated US$1 billion will roll off the first major tranche of guaranteed funds as they reach maturity. Naturally, everyone involved in the fund industry has a vision, along with helpful suggestions, about where that money should go next.
'Every asset manager these days is eyeing this money to see where it goes, and every bank has been actively planning for the roll-off,' says Doris Wong, head of fund distribution in Greater China at SG Asset Management (SGAM).
The billion-dollar jackpot may be the stuff of sales managers' fantasies, but for more cerebral industry players it is a cause for concern. In recent years, Hong Kong's fund industry has celebrated an impressive 9.5 per cent fund penetration rate (as of July-August 2002, based on a survey of members by the Hong Kong Investment Funds Association (HKIFA)).
But factor out guaranteed funds and that penetration rate could dwindle. There are no precise figures to show by how much, but numbers from the HKIFA show net fund sales from 2001 to 2003 totalled US$11.97 billion; and of that amount, US$7.25 billion or about 61 per cent consisted of guaranteed fund sales. Seventy per cent of those investing in guaranteed funds were first-time fund investors - former savers who were simply looking for an alternative to low bank deposit rates.