ABF Hong Kong Bond Index Fund
A unique investment choice for asset-liability matching needs
Important Information
Investments involve risks. Investors are advised to consider their own investment objectives and circumstances in determining the suitability of an investment in the Fund. An investment in the Fund may not be suitable for everyone. If you are in any doubt about the contents of this document, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser. Investors should note:
- The Fund is a passively-managed index-tracking exchange traded fund that aims to track the Markit iBoxx ABF Hong Kong Index. There is no guarantee or assurance of exact replication of the Index. The manager will not have the discretion to adapt to market changes due to the inherent investment nature of the Fund. A fall in the index will result in a similar fall in the net asset value of the Fund.
- The listing of the Fund on the stock exchange in Hong Kong does not guarantee a liquid market and the Fund may be delisted. The Fund’s market price on the stock exchange may be different from its net asset value per unit.
- The Fund may invest in financial derivative instruments for investment purpose which may lead to higher volatility to its net asset value.
- The Fund may pay dividends out of capital or gross of expenses. Dividend is not guaranteed and may result in capital erosion and reduction in net asset value.
- Investing in the Fund involves substantial credit, credit rating, currency, debt securities, interest rate, valuation, sovereign debt, geographic concentration, passive investment, termination, trading, volatility and liquidity risks. In the case of turbulent market situation, investors may suffer substantial loss.
- Investors should not invest solely based on information on this page and should read the offering documents for details.
ABF Hong Kong Bond Index Fund (stock code 2819)
ABF Hong Kong Bond Index Fund (stock code 2819) seeks to provide total returns (before fees and expenses) which correspond to the performance of the Markit iBoxx ABF Hong Kong Index1. The index is an indicator of investment returns of Hong Kong dollar denominated bonds issued by government, quasi-government and supranational entities.
ABF Hong Kong Bond Index Fund is a type of bond index ETF. A bond index ETF is an exchange traded bond fund with an investment objective of tracking and replicating the performance of an index of bonds, based on a disciplined and rule-based methodology. The value of an ETF is indicated by its net asset value (NAV) that is calculated with reference to the market value of the securities held in the portfolio. However, the trading price of an ETF, like that of a stock, is determined by the supply and demand of the market. The trading price of an ETF may not therefore be always equal to its NAV.
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What is Hong Kong Dollar Bond?
Hong Kong dollar bonds mainly comprise of government and quasi government bonds, and are generally characterised by lower risks comparatively. In times of volatility, these types of bonds are often perceived to be one of the avenues to invest capital given their comparative stability.
As a relatively lower risk investment vehicle, Hong Kong dollar bonds are gaining popularity among general investors. They are not only relatively less volatile than the equity market by nature, they also aim to provide a consistent stream of potential interest returns.
It is especially important for investors to manage the risks of their investment portfolios at times of market volatility. Investors could potentially diversify risks by adjusting the proportion of bonds in their portfolios subject to their individual investment objectives, time horizon and risk appetite.
Benefits of HK Dollar Bond
Asset-liability matching needs
Hong Kong dollar bonds may be an investment choice for institutional investors due to their relatively stable characteristics which can be used for asset-liability matching needs in particular for Hong Kong based investors.
Lower exchange rate risk
For local investors, the exchange rate risk is lowered by investing in Hong Kong dollar bonds as the dealing currency for these bonds is Hong Kong dollar. Investors may suffer from exchange-rate fluctuation risks if they invest in foreign currency denominated bonds, as the foreign exchange rates are bound to fluctuate against the Hong Kong dollar from time to time.
Lowering your average portfolio risk
Hong Kong dollar bonds are relatively less correlated to equities. In addition, these bonds normally pay regular dividends#. As such, adding bonds to your portfolio could help mitigate the volatilities of high-risk assets in your investment portfolio.
#Dividend is not guaranteed. A positive distribution yield does not imply a positive return.
Who should invest in ABF Hong Kong Bond Index Fund?
ABF Hong Kong Bond Index Fund may be one of the possible solutions for investors who aim for potential regular income regardless of age and working status:
- Young investors who wish to start small and aim to build their wealth over time
- Middle-age working group with a specific need for a diversified portfolio to balance risk and return
- Matured generation whose main investment objective is to maintain Capital*
Investor should be aware that the Fund differs from a typical unit trust. Investor should refer to the offering document for details of these differences and the fees and expenses involved in investing in the Fund. Investor should note that the market price of the Fund's unit on the exchange may be different from the net asset value per unit of the Fund and the units may be delisted from the stock exchange.
Potential benefits of ABF Hong Kong Bond Index Fund
- Target to provide potential stable income through semi-annual dividend distribution (if any) (Dividend is not guaranteed and may be paid out of capital. Please refer to the offering document for further details including the risk factors.)
- Diversified portfolio of bonds issued by government, quasi-government and supranational entities
- High transparency and convenience as it is traded on the Hong Kong Stock Exchange
Resources
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Important notes:
1 Markit iBoxx is a registered trade mark of Markit Indices Limited (previously known as International Index Company Limited) ("Markit") and has been licensed for the use by the Manager and the Trustee. Markit does not approve, endorse or recommend the Manager, the Trustee or the Fund. The Fund is not sponsored, endorsed or sold by Markit and Markit makes no representation regarding the suitability of investing in the Fund.
This page is prepared for general information purposes only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive it. This page does not constitute an offering document and should not be construed as a recommendation, an offer to sell or the solicitation of an offer to purchase or subscribe to any investment.