For Immediate Release
August 29, 2002 |
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Over 500,000 HK adults invest in mutual funds
9.5% of the adult population in Hong Kong currently invest in mutual funds, according to a survey commissioned by the Hong Kong Investment Funds Association ("HKIFA") in July/August 2002. Based on the 2001 Census data, this means that over 500,000 Hong Kong adults are mutual fund investors.
The penetration rate compares favorably with the 7.8% and 3.2% recorded respectively in year 2000 and 1997.
The steady increase in penetration rate indicates that professional investment management services are no longer only enjoyed by high-net-worth individuals or institutional investors, but are increasingly used by the general public.
As for investment in Hong Kong stocks, the investor surveys of the Securities & Futures Commission indicate that 22.5% of Hong Kong adults invest in stocks in 2001, against 23% in 1999 and 20% in 1996.
"Funds" are defined in this survey to include "retail unit trusts/mutual funds" and "investment-linked assurance schemes", but exclude the TraHK and MPF.
Out of 1,000 fund investors interviewed, the main reason cited for investing in funds is the "low deposit rates". This has prompted 27% of the respondents to look for alternative instruments that offer returns that are better than deposits. 16% perceive funds as a means to diversify risks while 15% believe that funds can bring stable returns. Referrals by friends and banks also are important factors (14% and 12% respectively cite these as key factors).
The historic low interest rates, the lackluster local property market and the volatilities of the global stock markets have accentuated the needs for capital preservation, diversification and professional investment management.
Managed by professional fund managers, mutual funds have been able to meet these needs because they cover a wide array of products which can cater to different investors' risk and return appetites.
Amongst the various types of products, guaranteed funds have been the most popular in the past two to three years, with 50% of the respondents saying that they invest in these products. This is followed by equity funds (48%) and bond funds (14%).
"Guaranteed funds" is probably one of the key, if not the most important, factors which has contributed to the growth of investor base in the past two years. 51% of the respondents say they have only started to invest in funds in the past three years. Out of this group, close to half have only started in the past 12 months.
38% point out that they only invest in one fund - primarily guaranteed funds - and 49% hold between two and five funds.
Between October 2000 - when the "guaranteed fund" category is added to HKIFA's fund sales report - and June 2002, the sector registered total gross sales and net sales at US$6.23 billion and US$5.77 billion respectively.
In general, fund investors regard fund investment as a "medium risk/medium return" product - 64% indicate so. The mean risk and return is 3 & 2.9 respectively, out of a scale of 5.
As for the time frame investors adopt in assessing a fund's performance, 45% of the fund investors indicate that they base on more than one year's performance, whereas 51% focus on shorter term performance, i.e. one year or below.
Risks and returns vary with the types of funds. To assess a fund's risk/return characteristics, one should look at the fund's investment objectives, policies and restrictions. Also, one can study a fund's past performance and volatility over a longer timeframe, say five or ten years, to understand whether the fund has been able to perform consistently in different market conditions. Also, to put the data into perspective, it would be useful to compare how a fund fares against the same type of funds and the relevant benchmark. However, one should always bear in mind that past performance is no guarantee of future returns.
Most investors tend to view fund as a relatively medium and long-term investment: 32% of the investors hold their funds for more than three years; 20% hold for one to three years. Only 15% hold their funds for less than one year.
The key reasons cited for switching and redeeming are "profit taking" (37%) and "in need of cash" (28%). Other reasons mentioned include "fund price starts to fall" (12%) and "when recommended by distributors" (10%).
80% of the respondents invest HK$50,000 or below per transaction. Out of this group, three-quarters invest below HK$20,000 per transaction, probably reflecting that more and more people are investing through investment-linked assurance schemes.
64% of the respondents indicate that their total fund assets are below HK$100,000. 81% of the respondents point out that fund assets account for less than 40% of their total liquid assets. Within this group, three-quarters estimate that funds only account for less than 20% of their liquid assets.
A typical fund investor is above 30 years of age and is relatively well-educated. He/She is employed in a capacity other than managerial and professional grades, with monthly income of below HK$20,000 and lives in a private flat.
The survey was conducted by NFO WorldGroup - Hong Kong through telephone interviews in July/August 2002. For the survey on fund penetration, 1,000 respondents have been successfully interviewed. For the survey on fund investor profiles, another 1,000 respondents have been interviewed.
The HKIFA has 47 fund management companies as full/overseas members. It has about 50 associates, which include trustees and other professionals that are involved in the creation and administration of funds.