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Fund industry starts off in 2013 with record inflows

 

April 19, 2013

 

 

Fund sales powered on in the first two months of 2013, with gross sales and net sales reaching US$13.75 billion and US$3.92 billion respectively, according to the Hong Kong Investment Funds Association ("HKIFA"). 

 

Compared with the same period last year, gross sales went up by 84% whilst net sales soared by 3.4 times.

 

Fund sales charted new heights in January 2013: gross and net sales reached US$8.46 billion and US$2.31 billion respectively, though this had dropped off by around 30% in February due to the Chinese New Year.  

 

In the first two months, bond funds still accounted for the lion’s share of the industry's gross sales.  But on a net basis, it was the balanced funds (or mixed asset funds) category that contributed most to the inflows.

 

Gross and net sales of key asset classes

(the figure in bracket – as a % of the industry total):

 

 

2nd quarter 

2012

3rd quarter 

2012

4th quarter 

2012

First two months of 2013

Gross sales

Net  

sales 

Gross sales 

Net sales 

Gross sales

Net sales

Gross sales

Net sales

US$ billion (Account for industry total)

Balanced funds

0.88 

(8%)

0.38

(10%)

2.17 (14%)

0.94

(27%)

2.15 (14%)

0.91

(21%)

3.96

(29%)

2.84

(72%)

Bond funds

7.49 (67%)

3.38

(85%)

10.93 (68%)

3.04

(89%)

10.04 (66%)

3.98

(91%)

6.42

(47%)

0.69

(18%)

Equity funds

2.50 (22%)

0.24

(6%)

2.42 (15%)

-0.44

(-13%)

2.71 (18%)

-0.27

(-6%)

2.94

(21%)

0.37

(10%)

Industry Total

11.26

3.98

15.98

3.41

15.25

4.38

13.75

3.92

 

Balanced funds had already attracted a modest level of inflows since the middle of 2012, but sales have only taken off since the beginning of this year.  

 

Gross sales of balanced funds in the first two months alone reached US$3.96 billion, almost equal to 70% of this sector’s gross sales in 2012.  The growth was even more remarkable on a net basis – soared to US$2.84 billion, equivalent to 1.2 times of their net total for the whole year of 2012.  

 

On an YTD basis, gross and net sales of balanced funds accounted for 29% and 72% of the respective industry totals, way above their percentage share in 2012.

 

Bond funds had been very popular in the past two years.  Whilst they still accounted for 47% of the industry gross total on a YTD basis (US$6.42 billion), gross redemptions had surged from US$3.84 billion (total of November and December’s gross outflows) to US$5.73 billion (total of January and February).   This had resulted in a sharp drop in net inflows – to a meager US$0.69 billion.  In 2012, gross and net sales of bond funds took up 67% and 96% of the industry totals respectively.  

 

Amongst the various bond categories, global bond funds recorded the heaviest net outflows, at over US$81 million.  U.S. bond funds and European bond funds also registered US$53 million and US$7 million net outflows respectively.

 

Sales of high yield bond funds, the best selling sector last year, also saw a slowdown in inflows.  Last year, they attracted an average monthly net inflow of US$600 million from May to November (this category had only been added to the survey since May last year). But in December and January, gross inflows had stalled and redemptions soared, resulting in net outflows of US$133 million and US$81 million respectively, though this had been reversed in February when the sector was back to net inflows (US$219 million)  

 

While interest in bond funds seemed to have faltered, more investors had started to warm to balanced funds and certain equity categories 

 

Gross sales of equity funds reached US$2.94 billion and their share in the industry total saw a modest increase, from 19% (full year of 2012) to 21% (2013 YTD).    But it was on a net basis that the change was more apparent: they attracted net inflows in both January and February, totaling at US$374 million - after witnessing net outflows for two consecutive quarters.

 

Nine out of the 16 equity categories recorded net inflows.  Asia Regional (excl. Japan) equity funds came first amongst the various equity sectors by pulling in US$293 million.  China equity funds came second by registering net inflows of US$201 million.

 

The Japanese stock market made impressive gains since the end of last year. Gross inflows to Japanese equity funds went up but remained subdued in absolute terms (at close to US$40 million), though this already surpassed the full year total of 2012 which was at US$33 million.   They managed to attract moderate net inflows in both January and February (totaled at US$22 million), putting an end to 21 consecutive months of net outflows.

 

Commenting on fund flows, Mr. Lieven Debruyne, Chairman of the HKIFA said “following on last year’s strong sales momentum, the industry has continued to register robust inflows in the first quarter of this year.  We expect that this trend will continue into the year as there is a sustained demand for products that provide yields in a low interest rate environment.  And products that provide regular payouts will continue to be sought after by investors avidly.”  

 

“In terms of asset class, we note that investors have gradually moved from a bond-centric approach to a more balanced one, either by getting exposure through balanced/mixed asset funds and/or certain equity funds.”  

 

Bruno Lee, Unit Trust Subcommittee chairman noted, “the global stock markets have been buoyed by the accommodating monetary policies adopted by the U.S., Europe and Japan central banks.  Also, more signs of economic recovery, albeit gradual, have bolstered investment sentiment.” 

 

“However, anemic pace of the recovery of the labour market in the U.S. and other developed markets, the geopolitical risks in North Asia and the Eurozone debt crisis would continue to plague the global markets.”  

 

“Thus, whilst the appetite for risky assets may have started to come back, we won’t expect to see a huge spike of sales in these funds in the short term.  In the meantime, the focus would probably continue to be on yield-generating products, especially those which can enable investors to capitalize on the upside that economic recovery brings, and at the same time offer some downside protection to brace out market volatilities.”

 

HKIFA has 76 fund management companies as full/overseas and affiliate members. It also has 49 associate members which include trustees and other professionals that are involved in the creation and administration of funds.