Chasing yield: Hong Kong mutual fund sales record best quarter in 3 years as investors pile into bond products

Hong Kong mutual fund sales recorded their best quarter in three years, as retail investors snapped up bond funds in their pursuit of elevated yields, according to an industry body.

Hong Kong retail funds recorded net inflows of US$3.8 billion in the three months to March, the most since attracting US$4.6 billion in the same period in 2021, and a sharp reversal from the US$2.1 billion net outflows seen in the previous quarter, according to data from the Hong Kong Investment Funds Association (HKIFA), which represents the local units of international fund houses.

Fixed-income funds were the top draw for investors, pulling in US$4.1 billion of inflows during the period, with gross sales more than doubling from the previous quarter, the data showed. Most of the new capital was ploughed into global bond funds and North American bond funds.

Money market funds, which invest in cash or cash-like instruments, attracted US$632 million of net inflows.

“The quest for income continues to be top of mind for investors,” said Sally Wong, CEO of HKIFA. Against the backdrop of market volatility, those with greater risk appetite are also increasingly exploring non-investment grade fixed-income assets, such as high-yield and emerging-market bonds, for potentially higher returns, she added.

Investors have been snapping up bond products this year as they seek to lock in elevated yields ahead of potential interest-rate cuts by major central banks. The yield premium as per a Bloomberg index tracking both investment-grade and high-yield global corporate bonds tightened to a three-year low during the first quarter.