Guaranteed-Return Funds Boom In Hong Kong

by Mary Swire, Investors Offshore, Hong Kong

26 March 2002

As in other parts of the world, falling interest rates and equities in 2001 led Hong Kong investors to switch their savings out of bank deposits and equity funds into guaranteed return fixed income funds.

The market was led by HSBC, which reported tripled sales of unit trusts (mutual funds) in 2001, including US$2.5 billion worth of guaranteed funds during the year.

"Our wealth management initiatives really worked. We all along realised interest spreads would come under pressure and put a lot of effort in trying to boost the contribution of fee income from unit trust sales," said HSBC general manager Raymond Or Ching-fai.

Hong Kong Investment Funds Association (HKIFA) data shows that HSBC's sales represented 65 per cent of the US$3.81 billion gross sales of guaranteed funds during the year. Guaranteed funds accounted for 40.2% of all fund sales last year, compared with just 0.45% in 2000. Sales of European equity funds fell to US$237.82 million (just 5.5% of total sales) in 2001, down from US$1.34 billion in 2000 (22.5% of gross fund sales for the year).

Another big winner was Schroders Investment Management (Hong Kong), which achieved sales of US$1 billion of guaranteed funds in the year. New chief executive Michael Dobson, making his first visit to Schroder's Hong Kong division, said the effort lifted Schroders to the top three providers of guaranteed products in the Hong Kong market after HSBC and Hang Seng.

"That was a pretty impressive result, partly the outcome of having the right product available at the right time, but indicative also of the innovativeness of Schroders," he said.

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