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Fund redemption as target returns achieved

Added 3rd March 2015

Meeting of the achieved target returns rather than poor fund performance is the key reason that a majority of Asian retail investors sell their fund investments, according to new research from Cerulli Associates.

Fund redemption as target returns achieved

The research firm said almost 60% of Asian retail investors who have exited mutual funds did so because the funds achieved their target returns. 

Slightly less than half exited due to poor fund performance, while two in five retail investors redeemed fund investments in anticipation of poor market conditions.

"A good sign for fund managers is that 60% of retail investors exited mutual funds because they had served the intended purpose. Satisfied customers will return at the next opportunity when a suitable product is offered," said Shu Mei Chua, associate director.

This was among the key findings of the Cerulli survey of 4,000 retail investors, which was carried out during mid-2014, across wealth tiers in China, Hong Kong, Taiwan, and Singapore.

Another key finding from the survey was that the mutual fund investors in these four countries tend to be younger than in Japan. In Japan, more than half of investors are more than 60 years old. 

On the other hand, four in five investors in the four countries sampled for research are less than 50 years old. Three in five are less than 40 years old.

"There is some food for thought here, especially when dealing with redemptions due to market volatility. The younger demographic profile of mutual fund investors suggests that fund managers and distributors could step in to provide more hand-holding by providing timely financial advice during periods of market volatility," Yoon Ng, Asia research director said.

Recent data from Lipper showed that the global fund industry ended 2014 with net outflows predominantly led by Europe. Even Asia ex-Japan had outflows amounting to nearly $79bn.

Top performing Asia ex-Japan equity funds delivered superior returns to investors in 2014 due to investments in the Indian and Chinese equity markets, which surged during the year.



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