Types of Investment-linked Funds 投資相連基金種類

Deposit Fund 存款基金

A deposit fund is a notional interest-bearing fund, also called a money market fund or money fund. Its open-ended structure gives small investors access to short-term money market instruments, aiming to produce stable income while keeping capital risk to a minimum.

The unit offer price normally stays fixed, for example at HK$1,000 per unit. Interest is converted into additional units at that price and credited to the account, so accumulation is reflected mainly in a growing number of units. Deposit funds offer relative safety, stability and liquidity, with returns that may exceed bank deposits, but interest rates fluctuate and returns are comparatively low.

Unitised Funds 單位化基金

Unitised funds are managed separately by an authorised insurer or an independent fund manager. Bond funds seek income with limited capital risk through government or corporate debt; some also hold high-yield junk bonds, exposing investors to rising interest rates and issuer credit risk. Equity funds focus on long-term capital appreciation, generally carry more risk than bond funds and face company failure risk. Index funds passively follow a specified index, which need not be an equity index; limited trading usually means lower management fees, with the aim of following the tracked market rather than beating it through active selection.

Warrant funds mainly use warrants and their leverage to seek exceptionally high returns, with extremely high risk. Global funds invest in shares or bonds worldwide, offering diversification and overseas opportunities alongside currency, political, custody, accounting and information risks. Regional/country funds focus on a particular market and are typically closed-ended, although open-ended versions also exist; growth opportunities come with high risk, lower liquidity and limited diversification.

Specialty funds concentrate on an industry or sector, using specialist knowledge to capture growth but carrying concentration risk and potentially low liquidity. Income funds prioritise current income from sources such as preference share dividends and bond coupons, with relatively limited capital appreciation; they generally offer medium risk and good liquidity, although some have more aggressive objectives. Balanced funds combine shares and bonds to seek both appreciation and income without excessive risk; diversification comes with moderate returns and potentially less participation in a bull market.

Growth funds seek maximum capital appreciation rather than a steady dividend stream and may buy smaller, less familiar companies; aggressive or speculative strategies can involve extremely high risk and inconsistent income. Guaranteed funds pay a guaranteed amount at maturity under their terms, with minimum investment periods, special conditions, high guarantee fees and relatively lower returns to consider; the same guarantee should not be assumed on early exit. Funds of funds, also called unit portfolio management funds, invest in other mutual funds for professionally managed diversification but may involve higher management fees.

Switching 轉換

Switching lets policyholders move investments between funds available under their policy and adjust their portfolio. Most Hong Kong authorised insurers selling investment-linked policies offer more than one fund and generally allow switching or portfolio changes at any time; the particular arrangements and charges should be checked against the policy.

Fund allocation sets the proportion invested in each fund. For example, an allocation of 40%, 30%, 20% and 10% to Funds A, B, C and D directs contributions in those proportions. Fund selection and allocation should consider both risk and return, rather than past performance alone.

Switching can reflect life stages or market changes. Someone approaching retirement might move from a more aggressive equity fund to a more stable and liquid income fund, while someone seeking technology-sector growth might move from a balanced fund to a specialty fund. The latter also increases sector concentration, and switching itself does not guarantee better returns.