24 Oct 2013

Eastspring Investments, the Asia asset management arm of UK-based Prudential plc, today announced the findings of its inaugural Mutual Fund Investor Behaviour Study and the launch of the industry’s first ‘Growth & Income Index’.

The Eastspring Investments Growth & Income Index offers fresh insight into fund investors’ planned asset allocation over the next six months across Asia.

Based on 1,501 interviews conducted in Hong Kong, Singapore, Malaysia, Taiwan and Koreain July 2013, the Indexshows that there is an allocation preference for income funds among current and intending fund investors in the next six months.

Commenting on the launch of the Growth & Income Index and the survey, Guy Strapp, Chief Executive, Eastspring Investments, said: “This forward looking index will help the investment community understand projected investor appetite and potential asset allocation in key markets in Asia.”

“The research provides important insights into what current and intending fund investors are planning and allows the industry to meet their needs through the development of appropriate products,” Mr Strapp said.

Asia’s retail mutual fund investments currently stand at about US$1912 billion1. According to a March 2012 PwC report, while about 60% of the world’s population live in Asia, Asian investors’ investments only account for about 13% of total global assets under management.2 This figure is expected to grow.

The Index measures mutual fund investor appetite on a scale of 0 to 100 with 0 being income exposure and 100 being growth exposure. With a score of 45, this first Index score indicates that investors have reported an intention to shift toward income funds in the next six months.

According to Alvin Chiu, Head of Marketing, Eastspring Investments, “The index shows that Asian investors are continuously searching for yield. The findings also indicates that they are investing in products other than bond funds to acquire regular income.

“The research shines an interesting light on future investment intentions by investors and provides a sense of what their product appetite is for the coming six months,” Mr Chiu added.

The Index will become an annual barometer of the intentions of mutual fund investors.

According to the survey, Asian high dividend equity and Asian bond funds currently top the income fund ownership ranking among investors at 37% and 32% respectively.

The study reveals that over the next six months, holdings of Asian bond funds and emerging markets debt funds are likely to drop and be replaced by multi asset income, equity income and high yield funds. The study also shows an intended increase in ownership of global themed income products in selected markets, especially in Malaysia and Korea.

Investment portfolio
Asian mutual fund investors have about one third of their assets in mutual funds, followed by cash and stocks. The survey reveals that investors in the five markets on average allocate 45% of their mutual fund portfolio intheir home market and 85% of them invest in mutual funds through regular savings plans.

In Malaysia and Korea, investors tend to allocate a much larger proportion of their mutual fund assets in the home market. In Taiwan, however, investors generally have very geographically diverse mutual fund portfolios. Mutual fund investors in the region review their portfolio every nine months on average.

Confidence and attitudes
Amid improving equity markets, the study found that there is an increased confidence in stocks across most markets. A slight drop in confidence level in real estate in the next six monthswas observed for markets like Hong Kong, Singapore and Malaysia.

The biggest concern for investors is inflation, which ranked higher than a possible slowdown in China’s economic growth and uncertainty in the Eurozone.

Investor education
“The survey shows investors are hunting for yield but it also raises the question of whether they really understand their investments,” said Mr Chiu.

“As investors continue searching for yield through different income products, it is critical for them to understand the risks involved. The study revealed there is a need for investor education, with only 21% of income fund investors claiming that they fully understand the risks involved in their income fund investments,” said Mr Chiu.

In addition, 46% of them incorrectly agreed that all bond funds are similar and low 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.

“Our forward-looking study will not only help us to keep abreast of mutual fund investor attitudes and preferences but also help us to develop products and investor education programmes to suit their needs,” Mr Chiu added.

1Strategic Insights, August 2013
2PwC Asset Management Insights, March 2012

* 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 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, and evaluate investment intentions for the next six months. The study was conducted in July 2013 and involved online interviews with 1501 investors in Hong Kong, Singapore, Malaysia, Taiwan and Korea.

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