ASK a fund management house to look into its unit trust crystal ball and the picture which emerges is a hazy one. The industry which Americans have received with open arms has had a somewhat less enthusiastic embrace by those in Hong Kong. The staggering penetration level of an estimated 20 per cent in the United States is a far cry from what some suggest is an optimistic two per cent in Hong Kong. A survey last year by the Stock Exchange of Hong Kong put the number at less than 0.5 per cent. In such an environment the struggle is less between the fund managers than in trying to convince a reluctant public about the merits of unit trusts. So why the relatively low penetration? According to Richard Haw, chairman of the Hong Kong Investment Funds Association (HKIFA), it's a case of oranges and lemons. The unit trust industry had an easier task in the US, he said. The savings and loans crisis in the US meant Americans lost confidence in the banks and looked to alternative vehicles. ''The American public has more trust in some of these. That situation doesn't apply in Hong Kong at all,'' he said. In an economy such as Hong Kong's, where investors have not had their confidence shattered to the same extent as the US, alternatives have not been needed. Add to that a soaring property and stock market and the investor need not pay the added front end and management fee to join a unit trust. But this does not explain the struggle fund management houses have faced when it comes to attracting investment. Even US mutual fund giant Fidelity has found the market a difficult one to crack. The one exception is Jardine Fleming, which a rival suggests has captured about 40 per cent of the Hong Kong market. But Jardine also has an advantage in that it carries one of the most widely recognised names in Hong Kong. Having offered unit trusts in the territory for more than 20 years, Jardine is an older fund manager in what is still a relatively young industry. Investors have grown accustomed to its presence and can accept that the fund management has a knowledge of the region as well. Its performance in recent months has borne out the company's respect. In the past six months, the performance of some of its more than 40 unit trusts has been what one competitor described as ''magical''. Of the 21 categories of funds listed in last week's Sunday Money rankings compiled by Micropal, eight of JF's funds finished first in their one-year performance results; 14 were in the top three. While critics will be quick to point out that during downturns Jardine's funds have tended not to perform as magically, Jardine's strength is a point no one will contest. And most agree the position will be a hard one to shake. ''When you are in a good position it is quite difficult to lose your market share. It's all about brand name,'' said Mr Haw. But even if Jardine is first and the others, such as Wardley, Schroders, Fidelity or Thornton's, fall a distant second or third, the struggle remains determining why more investors have not queued up to join unit trusts. Again and again, fund management houses will suggest new ideas need time to settle. In the US, investors have had close to 50 years to grow accustomed to the idea, one fund management house spokesman suggested. Education was needed, he said. But a less salient reason may be an unanticipated aversion to risk on behalf of the Hong Kong investor. While it is widely believed the Hong Kong investor likes to speculate and take risks, last year's survey by the Stock Exchange of Hong Kong suggests the opposite. The survey revealed 80 per cent of investors preferred safe and stable investments which generated average or less than average returns. A job for fund management houses therefore may be to convince investors that by putting their money in a unit trust, closer monitoring means risk is diminished to some extent. Fidelity has taken this philosophy on board. To introduce investors to unit trusts, it has begun to advocate a wider spread of unit trusts which include bond-based and currency-based unit trusts. The shift of emphasis away from equity alone, it claims, has helped it attract more investors. But fund managers disagree as to the extent to which bond and currency-based unit trusts will attract investors. Hong Kong's high inflation means the lower returns hold limited appeal, they maintain. ''I don't think the Asian investor is particularly interested in bonds and money markets,'' said Stuart Aldcroft, a director at Wardley Investment Services. So, if you discount bond and currency-based unit trusts, what's the answer for improving sales? Increased awareness through advertising, greater accessibility of information and better distribution through banks are given as three ways to attract investment in unit trusts. ''Those that have the best distribution will perform better,'' Mr Aldcroft said. This feeling is echoed among other fund houses which continue to look toward offering a wider selection of equity based unit trusts and developing ways in which to better distribute these products, particularly through banks. The arrival of Citibank and Chase, which are more actively advising on unit trust selection, is seen as one step forward in that respect. These banks represent a change from the more passive approach taken by banks. People such as Indosuez Asset Management Asia marketing manager Jennifer Carver also believe no loads will feature increasingly more on the landscape of unit trusts. Rather than take a cut from the loading fee, intermediaries will receive some sort of payment from the management fee, she suggested. Currently, she estimated, about 80 per cent of the front end load was given as commission toward intermediaries. Observers also agree the industry will be more technologically advanced. There is even talk of developing a unit trust system in the future whereby units can be monitored, bought, and sold through a system not unlike an ATM at a bank. What does all this mean for the status of the players in the unit trust industry? More money, no doubt. While fund managers differ as to how effective a tool advertising may be, more resources devoted to service centres, to marketing and to the development of distribution channels can only help the fund management houses convince investors that the unit trust industry is a vehicle in which they should invest. All this takes money to achieve. While good returns undoubtedly are vital, as long as Asia continues to grow, fund managers are convinced good returns can be achieved. The question for them is not which will benefit, but which will benefit most. If Asia develops as many hope, Hong Kong may become the hub of a many wheeled spoke when it comes to unit trusts. The larger the middle class, the greater the potential for unit trusts and, having established a strong foothold, fund management houses will set their sights outside Hong Kong. As Jardine Fleming has shown, those fund management houses that thrive will also be those willing to devote the time, money, and resources to ensure the market takes hold.