GROWTH & INCOME INDEX 201 MUTUAL FUND INVESTOR BEHAVIOUR STUDY HONG KONG October 201
CONTENT FOREWORD Foreword By Eastspring Investments Executive Summary The Growth & Income Index Investor Current and Projected Holdings Geographic Preference and Diversification of Portfolio Investor Confidence in Different Asset Class Key Findings The Growth & Income Index Income Fund Ownership & Projected Holdings Mutual Fund Allocation by Geography Investor Confidence in Different Asset Class Investor Education Appendix Methodology Eastspring Growth & Income Index About Eastspring Investments Media Enquiries In an increasingly complex global market environment in which mutual fund investors are seeking greater control over their portfolios, changes in investor outlook and risk appetite have a significant bearing on markets. We are therefore delighted to release the first Eastspring Investments Growth & Income Index and Asia Mutual Fund Investor Behaviour Study. The Index, the only forward-looking index focusing exclusively on Asian mutual fund investors, offers a new perspective on future shifts in investor asset allocation appetite. This is powerful information with Asia's retail mutual fund investments currently worth about US$1912 billion 1 and growing. According to a March 2012 report by PwC, while about 60 of the world's population live in Asia, Asian investors investments only account for about 1 of total global assets under management. 2 Eastspring Investments development of this measurement tool provides important insight into what current and intending mutual fund investors are planning and allows the industry to better meet their needs through the development of appropriate products. Importantly, the findings support our ongoing commitment to investor education. I trust you will find this study of value. We look forward to sharing more investor insights with you in the future. Guy Strapp Chief Executive, Eastspring Investments 1: Strategic Insights, August 201 2: PwC Asset Management Insights, March 2012 1 2
EXECUTIVE SUMMARY THE GROWTH & INCOME INDEX THE GROWTH & INCOME INDEX The inaugural Eastspring Investments Growth & Income Index for Hong Kong stands at 5, indicating investors have a slight orientation toward income funds. Eastspring Investments inaugural Growth & Income Index for Hong Kong shows that Hong Kong investors are considering moving toward income funds in the next six month with an Index score of 5. When the research compared current mutual fund holders with mutual fund intenders the later were more income fund oriented with an Index score of 2. Mutual fund intenders are much more heavily inclined towards income funds than those who are currently investing in mutual fund. INVESTOR CURRENT AND PROJECTED HOLDINGS The Index offers fresh insight into fund investors planned asset allocation over the next six months across Asia. Currently Asian high dividend equities and emerging market debt are the most preferred mutual fund categories among Hong Kong investors, with 5 and 1 investors having allocated assets into them respectively. Despite the fact that Asian high dividend equities will remain the most popular fund type in the next six months, the survey showed a significant drop of in allocation. Emerging market debt is also expected to have similar decrease in allocation (-10). Growth & Income Index Increasing income orientation in next six months (N6M) 0 Income fund holders in Hong Kong are planning to reallocate their assets into Asian high yield bonds (+7), Asian multi asset incomes (+5), US corporate bonds (+) and global high dividend equities (+). 5 Increasing growth orientation in next six months (N6M) 100 9 Current mutual fund holders 2 Mutual fund intenders Base: Current and future mutual fund holders (28) GEOGRAPHIC PREFERENCE AND DIVERSIFICATION OF PORTFOLIO Hong Kong and China are the two main markets local fund holders invest in, with current allocations of 29 and 25 respectively. 52 of current mutual fund holders plan to change their allocation geographically, however, the change in geography is minimal with a slight decrease in Hong Kong investments expected (-) and a mild increase in global (+1) and emerging markets (+2) in the next six months. INVESTOR CONFIDENCE IN DIFFERENT ASSET CLASS Looking at different asset classes, Hong Kong investors are most confident about equities, closely followed by foreign currency, both currently and in the next six months. Real estate ranks at the bottom of the investor confidence chart at present and in six months time.
INCOME FUND OWNERSHIP & PROJECTED HOLDINGS MUTUAL FUND ALLOCATION BY GEOGRAPHY The three most favourable types of income funds are: Asian high dividend equities (5), emerging markets debt (1) and Asian bonds (). However, they are losing their charm in Hong Kong investors eyes. Investors are planning to move away from Asian high dividend equities (- to ) and emerging markets debt (-10 to 1), in six months time, and reallocate their assets into Asian multi asset income (+5 to 5), Asian high yield bonds (+7 to 25), US corporate bonds (+ to 12) and global high dividend equities (+ to 2). Although 52 of mutual fund holders plan to change allocation in the next six months, the geographic allocation of funds remains largely unchanged. Hong Kong and China remain the most favourable investment destinations, but there is a slight increase in interest in global (+2) and emerging markets (+1). Asian High dividend equities Income Fund Ownership Current vs. Next 6 months (N6M) Bonds Multi-asset income Corporate bonds High yield bonds Emerging markets Global US Debt Multi-asset income High dividend equities High yield bonds Government bonds High yield bonds Current 18 17 20 21 29 0 1 1 5 Change ( pts) Corporate bonds 8 12 Base: Current income mutual fund holders (122) Investment involves risk. Past performance is not indicative of future performance. Investors should read the relevant offering document for full details in particular information on investment risks before investment and to seek professional advice where appropriate. - -10-7 -2-2 -1 0 1 5 7 Next six months 2 5 1 25 1 0 2 20 17 Emerging markets North America Europe India Current mutual fund allocation and intention to change in the next six months China 25 Global 9 Others 2 Current Allocation Hong Kong 29 Japan APAC (excluding Japan) Base: Current mutual fund holders (1) 12 5 2 Next 6 Months 25 26 10 5 6
INVESTOR CONFIDENCE IN DIFFERENT ASSET CLASS INVESTOR EDUCATION Understanding of Income Fund Risks Hong Kong investors are most confident in equities at present, and this confidence is set to grow in the next six month. However, in light of the continuous surge in property prices in the past years, confidence in real estate will dip further in over the next six months. I fully understand the risks involved 21 Confidence in Asset Classes Today vs. Next Six Months (T2B) I have some understanding in the risks involved 8 Cash Stocks Bonds I am not quite sure about the risks involved 27 7 9 7 52 8 6 +2 +5-2 I have no idea on the risks involved Alternatives (E.g. Gold) Foreign currency Real estate Base: Income mutual fund holders (122) 0 27 8 9 100 2 21 - +1-2 Current confidence in asset class Base: All respondents (01) Next six months confidence in asset class The survey shows that while investors are hunting for yield, they also lack the understanding of their actual investments. The results of the study revealed that there is a genuine need for investor education as only 21 of income fund investors claim to fully understand the risks involved in their income fund investments. In addition, 50 of investors incorrectly agreed that all bond funds are similar and low risk. When choosing an income fund, male investors () are less inclined than female investors (28) to rely on the recommendation of financial advisors. Interestingly when asked whether all bond funds are similar and are of low risk, more than double the number of men incorrectly and completely agree to it (1), compared with only women (5). This hints at an over confidence among male investors in assessing income fund risk. Almost all investors want more information about investing in income funds and are most likely to seek this information from newspapers, magazines and online sources. Agreement with the Statement: All Bond Funds are Similar and Low Risk All income fund holders 5 27 28 of whom claim to FULLY understand income fund risk 50 15 5 A greater proportion of those who claim to be fully aware of income fund risk will correctly disagree to an erroneous statement compared with those with less claimed understanding; but at the same time, a greater proportion will also agree to this statement. of whom claim to have SOME understanding of income fund risk 1 2 27 Completely agree and Slightly agree Neither agree nor disagree Completely disagree and Slightly disagree Base: Income mutual fund holders (122) 7 8
APPENDIX ABOUT APPENDIX EASTSPRING INVESTMENTS METHODOLOGY The Eastspring Investments Mutual Fund Investor Behaviour Study is an annual survey designed to track current asset allocation and investment attitudes of mutual fund investors, understand the key drivers of decision making, measure market confidence, understand the perception on risk profile of income-generating funds and evaluate investment intentions for the next six months. Eastspring Investments, the Asia asset management arm of UK-based Prudential plc, today announced the results of its inaugural Mutual Fund Investor Behaviour Study. The survey is the first research study conducted in Asia to not only reflect current asset allocation and investment attitudes, but also evaluate future investment intentions. The fieldwork was conducted by TNS in July 201 and involved online interviews with 1501 investors in Hong Kong, Singapore, Malaysia, Taiwan and Korea. EASTSPRING GROWTH & INCOME INDEX The Growth & Income Index is a one number score that describes the net direction of preferences of mutual fund investors (including those intending to invest in mutual funds) as either shifting toward income funds or shifting toward growth funds in the next six months. The Index score of an individual investor is aggregated up to give a market level Index score: A score between 0 and 9 indicates that the overall investment direction of the market is moving towards INCOME FUNDS. A score between 51 and 100 indicates that the overall investment direction of the market is moving towards GROWTH FUNDS. METHODOLOGY Eastspring Investments, part of Prudential Corporation Asia, is Prudential's 1 asset management The Eastspring business Investments in Asia. Mutual It is one Fund of Investor Asia's largest Behaviour asset Study managers, is with annual operations in 1 markets survey designed (including to offices track current in the US, asset Luxembourg allocation and investment now, the attitudes UK) and of just under 2,000 employees mutual fund in investors, Asia and about understand US$9 the billion key ( 62 drivers billion) of decision in assets making, under measure management (at June 0, market 201). confidence, understand the perception on risk profile of income-generating funds and evaluate investment intentions for the next six More months. than Eastspring one-third Investments, of Eastspring the Investments' Asia asset management total assets are arm sourced of UK-based from third party clients Prudential including plc, today a wide announced range of the retail results and institutional of its inaugural investors. Mutual Eastspring Fund Investments also manages Investor Behaviour the assets Study. of life The and survey pension is products the first research sold by Prudential study conducted Group in Asia the UK, the US and to not across only Asia. reflect current asset allocation and investment attitudes, but also evaluate future investment intentions. Eastspring Investments operates in Japan, Malaysia, Singapore, South Korea, Taiwan, Hong Kong, The fieldwork the United was Arab conducted Emirates, by Vietnam TNS in July and 201 Indonesia, and involved and has online joint interviews venture operations in India, with 1501 China investors and Hong in Hong Kong. Kong, The business Singapore, opened Malaysia, a US Taiwan sales operation and Korea. in 2012 and stablished a management company in Luxembourg in 201. Together with Eastspring Investments, Prudential Corporation Asia (PCA) comprises the life insurance EASTSPRING businesses GROWTH of & Prudential INCOME INDEX plc in Asia spanning 1 markets: Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, and The Vietnam. Growth-Income Prudential Index plc is a is one an international number financial services group with operations spanning score that Asia, describes the US the and net the direction UK. of preferences of mutual fund investors (including those intending to invest in mutual funds) as either shifting toward income funds or shifting toward growth funds in the next six months. The Index score of an individual investor is aggregated up to give a market level Index score: Disclaimer A score between 0 and 9 indicates that the overall investment direction of the market This moving document towards is issued INCOME in Hong Kong FUNDS by Eastspring Investments (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. This document is solely for information purposes and does not constitute an offer or solicitation to anyone to invest in investment products. Past performance is not necessarily indicative A score between of future performance. 51 and 100 Any indicates view, opinion, that projection, or forecast on the economy, securities markets or the economic the overall trends investment of the markets direction is not necessarily of the indicative of the future performance of Eastspring Investments or any market funds is managed moving by towards Eastspring GROWTH Investments. FUNDS An investment is subject to investment risks, including the possible loss of the principal amount invested. Whilst we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this document is subject to change without notice. Eastspring Investments (excluding JV companies) companies are ultimately wholly-owned subsidiaries of Prudential plc of the United Kingdom. Eastspring Investments companies (including JV's) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America. For more information on Eastspring Investments, please visit: www.eastspringinvestments.com.hk 9 1 Prudential plc, incorporated and with its principal place of business in England, and its affiliated companies constitute one of the world's leading financial services groups and has been in existence for over 160 years. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world. Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America. 10
GROWTH & INCOME INDEX 201 MUTUAL FUND INVESTOR BEHAVIOUR STUDY HONG KONG Media Enquiries: MHP Communications Michel Chau, Email: michel.chau@mhpc.com Tel: +(852) 66 www.www.eastspringinvestments.com.hk