Sixty-three percentage of Hong Kong investors agree that index funds and exchange traded funds offer better diversification compared to other investments and 58% believe that they are less risky, according to a survey conducted by Natixis GAM.
The findings suggest that many Hong Kong investors are not fully aware of the risks of index funds versus their benefits, according to the firm.
The firm conducted a survey of 400 individual investors in Hong Kong. It is part of a global study of 7,100 investors in 21 countries across Asia, Europe, the Americas and the Middle East.
“Index funds may have a place in portfolios, but their inherent risks are often overlooked by investors who may mistakenly assign them benefits they may not have,” said Madeline Ho, the firm’s executive managing director, head of wholesale fund distribution for the Asia Pacific region.
“As a result, many investors may become blindsided by market swings and the value of their investments declines. This is why it is critical to truly understand the risk of your portfolio and to identify the sources of diversification,” she added.
The survey also found that 55% of Hong Kong investors believe that using index funds and ETFs will help minimise investment losses, while 60% of them believe that index funds provide access to the best investment opportunities in the market and 64% of them agree that index funds are a cheaper way to invest compared to other products.
The survey results come at a time when the value of active fund management is being debated. According to separate studies by S&P Dow Jones, index funds have clearly outperformed active managers. Roughly 80% of active fund managers in Europe and in the US failed to beat their benchmark over one-, three-, five- and 10 year periods, S&P data has shown.