THE Hong Kong Investment Funds Association, after the stellar performances last year of Southeast Asia's stock markets sparked interest in mutual funds, says it expects the sector to continue growing this year. But chairman Richard Haw conceded yesterday that the interest was bound to be tempered by sharp corrections experienced in nearly every stock market across the region this year. ''We don't think it will get too bad this year in terms of where the markets are and, provided that occurs, it will mean another year of progress,'' he said. Despite the inroads made in the past year, mutual funds have a penetration rate of only two to three per cent in Hong Kong because many investors are more content having direct control over their investments. With the markets tumbling more than 20 per cent since hitting record highs in early January, the issue of initial charges will probably attract more attention as investors begin to scrutinise their opportunity costs. According to a biannual directory issued by the HKIFA yesterday, more than 85 per cent of fund houses charge an initial fee of five to six per cent for equity funds while 70 per cent charge three to five per cent for bond funds. Mr Haw said it was likely the number of houses offering no-load funds would increase as the sector matured in Hong Kong. In North America, about 50 per cent of mutual funds do not have up-front or back-end loads. Mr Haw said, however, that it was possible for investors with large amounts of money to negotiate discounts from fund houses, given the amount of competition in the marketplace for new clients. Regent Pacific is the only fund management house in Hong Kong to offer no-load mutual funds. It expects no-load funds will account for about 25 per cent of the market in two to three years. Toronto-based Altamira Management recently acquired 51 per cent of Regent, a move Regent believes will boost the no-load concept in Hong Kong by providing it with access to Altamira's marketing and technical expertise. Mr Haw said the association would not be concerned if net sales figures in March declined, reflecting the weak performances of global stock markets. ''If they are slightly negative, it wouldn't be surprising given how the Southeast Asian markets have corrected in the first quarter, and that's an area where we had our largest net sales last year,'' he said.