英文證券卷十二 HKSI Paper 12 第一章

The role of a personal financial advisor is to identify the needs of their customers and assist their customers in planning investment strategies and ideas

The function of a corporate finance advisor is to provide companies with financial advises, especially in the area of listing and mergers and acquisitions, which is not the function of asset management industries. The asset management industry provides different entities including individuals, enterprises, and national entities with asset management services. The asset management industry manages retirement funds of most people through professional asset allocation, and builds and implements investment strategies through the use of economics knowledge, professional skills, and technical analysis.

Analysts generally don’t work for trustee.

The key benefits of managed funds are (i) access to professional investment management services; and (ii) diversification. Diversification is the ability to spread your assets across different asset classes, sectors, countries or issuers of securities. A diversified portfolio aims to minimize risk by offsetting losses from some securities with gains in others.

Financial advising is a process where an individual moves towards meeting his personal and financial goals through the development and implementation of a comprehensive financial plan.

A custodian is an agent that holds and safeguards the assets of an individual, a financial institution or corporation.

The wealth protection phase comes into operation as they approach retirement. Mr. Zhang and his wife may not earn a regular salary income, so they need to manage wealth they have created during their working lives to enable them to meet their lifestyle needs in retirement. Having much less risk than stock and more stability to generate income, fixed-income securities and bonds are suitable to retirees.

The Securities and Futures Commission has set standards on diversification in Hong Kong. These requirements are stated in the Code on Unit Trusts and Mutual Funds, and include: (1) A fund cannot hold securities issued by a single issuer with value more than 10% of its total net assets value. (2) A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.

Mutual funds are similar to investment trusts from an investment perspective, and the difference lies only in their legal structure. A unit trust is established in the form of a trust, while a mutual fund is established in the form of a company.

The ones who trades securities on behalf of clients are brokers at brokerages. Traders generally don’t trade on behalf of their clients.

Generally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa. Quantity demanded is therefore inversely related to price. Thus, demand curve is generally shown as negatively sloped curve.

The objective of the producer is to make a profit from the item. Hence, the most important factor, from the producer’s perspective, is the price that can be obtained from selling the item.

Managed funds allow individual investors to pool their money with other investors who have similar investment goals. Investment professionals (known as fund or asset managers) invest this pool of money in assets such as equities, fixed interest, real estate and/or cash. Investments in a particular fund will be made in line with the fund’s investment objective and strategy.

The key benefits of managed funds are (i) access to professional investment management services; and (ii) diversification. Diversification is the ability to spread your assets across different asset classes, sectors, countries or issuers of securities. A diversified portfolio aims to minimize risk by offsetting losses from some securities with gains in others.

Individuals, employers, institutions and companies are generally attracted to managed funds because their money is handled by professionals who have the expertise to produce a higher return for a given risk level than they would achieve themselves.

The return of fund cannot be guaranteed since it involves investments. The return of the fund, less fees and charges for managing the fund, is subsequently passed on to the investor. Managed funds are indirect investments and thus there is no control over the operation of fund.

Fees and charges charged by Managed fund include: Subscription fee; Redemption fee; Administration fee; Performance fee and Fund switching charge.

The issuer of the fund refers to the institution that initiated the establishment of the fund. One of the function of such institution is picking fund managers.

A fund manager receives money from investors to pool in an investment portfolio. A typical example is pension fund management. Fund managers have large amount of money to invest in various asset classes such as shares, property, bonds and cash. Owing to the needs and demands of their clients, some funds will invest in markets overseas in order to maximize profit-generating opportunities. Others will have the specific objective of generating returns from investing in overseas markets.

Han Sheng Capital is the fund manager. So Han Sheng Capital is responsible to execute the trading of the shares of We Drink company.

Financial planners assess the needs of the individual and his family in the light of his general age and lifestyle needs. Financial products provide different levels of return relative to their risk, and provide solutions for the individual’s specific needs. Financial planners use their specialist knowledge and skill to construct a financial plan, made up of strategies and actions, designed to meet their client’s goals. Generally speaking, Discount Brokers do not provide investment advice.

Financial planners assess the needs of the individual and his family in the light of his general age and lifestyle needs. Financial products provide different levels of return relative to their risk, and provide solutions for the individual’s specific needs. Financial planners use their specialist knowledge and skill to construct a financial plan, made up of strategies and actions, designed to meet their client’s goals.

In Hong Kong, the main institutional investors include banks, insurance companies, fund managers and other financial institutions.

In Hong Kong, the main institutional investors include banks, insurance companies, fund managers and other financial institutions. High net-worth investors are Retail/private investors, which are individuals who invest on their own behalf.

According to CUTMF, managed funds should not
I. Hold more than 10 per cent of its total NAV in securities issued by a single issuer
II. Hold more than 10 per cent of the ordinary shares issued by a single issuer
III. Hold more than 15% of its total NAV of securities neither listed, quoted nor dealt in on a market

Types of products offered by fund managers in Hong Kong include:
unit trusts and mutual funds;
pension funds;
insurance policies;
MPFs;
hedge funds (usually not open to retail customers).

Brokers execute trades on behalf of others in the exchange or earn commissions from matching the trades of buyers and sellers.

Often news is pre-empted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities.
The relation between interest rate and the stock price is negatively correlated and thus the unexpected increase in interest rate has a bad impact on the stock price.

With the globalization of investment activity, many independent fund managers have come to Hong Kong. Hong Kong attracts fund managers for several reasons, including: (1) its central location in Asia; (2) clear regulations on how to establish and become authorized in the local market, a just and equitable legal system, the English language (mandatory for conducting international business) and administration skills (needed to develop and maintain a viable operation);
(3) a simple and low-tax regime; (4) a window to mainland China (and its mass market); (5) a world class and technologically advanced communications system and telecommunication network; (6) high liquidity in the local stock market; (7) a plentiful supply of professionals, such as accountants, lawyers and stockbrokers, to support the fund management industry.

The key benefits of managed funds are access to professional investment management services; and diversification. Fund managers can also invest in a broader range of securities, and usually faster and more cheaply, than individuals. Certain investment opportunities may only be available to large investors, such as bonds and direct property. Through managed funds, small retail investors can gain exposure to such assets.

– A fund cannot hold securities issued by a single issuer with value more than 10% of its total net assets value.
– A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.
Investments in a particular fund will be made in line with the fund’s investment objective and strategy.

The key benefits of managed funds are access to professional investment management services; and diversification. Fund managers can also invest in a broader range of securities, and usually faster and more cheaply, than individuals. Certain investment opportunities may only be available to large investors, such as bonds and direct property. Through managed funds, small retail investors can gain exposure to such assets.

A fund cannot hold securities issued by a single issuer with value more than 10% of its total net assets value.

A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.

Qualified Domestic Institutional Investors (“QDIIs”) and Qualified Foreign Institutional Investors (“QFIIs”) are introduced in China in 2002. QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets, while QFIIs are foreign institutional investors who are allowed to invest in China A shares. These have an impact on the flow of funds in the market. Investment by QFIIs, for instance, has a positive impact
on the flow of funds into the country.

The Securities and Futures Commission has set standards on diversification in Hong Kong. These requirements are stated in the Code on Unit Trusts and Mutual Funds.

This work requires a high level of local and international financial knowledge and skill, including: (1) macro-economic and micro-economic analysis; (2) quantitative and statistical analysis; (3) global economic and political analysis; (4) accounting knowledge and skills; (5) financial statement analysis; (6) finance and investment portfolio management theory; (7)asset valuation of a full range of financial asset types.

Providing corporations with advice related to raising capital is the responsibility of cooperate finance professional.

Personal skills and attributes required for effective asset managers include: (1) communication and relationship skills; (2) analytical skills; (3) teamwork.

In Hong Kong, the main institutional investors include banks, insurance companies, fund managers and other financial institutions.

Retail/private investors: these are individuals invest on their own behalf. Their complexity of investment goal is lower, and there is no need of documentation of investment entrusted since they trade for themselves.

Private customer has an investment amount lower than institutional investor but higher than retail investor.

In a competitive global market, many types of managed funds are offered, including unit trusts, mutual funds, retirement or corporate funds and private equity funds. The management of all such funds is called asset management.

Hedge fund is the major classification of managed fund.

There are three reasons for their success: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.

Hong Kong attracts fund managers for several reasons, including: its central location in Asia; clear regulations on how to establish and become authorized in the local market, a just and equitable legal system, the English language (mandatory for conducting international business) and administration skills (needed to develop and maintain a viable operation); a simple and low-tax regime; a window to mainland China (and its mass market); a world class and technologically advanced communications system and telecommunication network; high liquidity in the local stock market; a plentiful supply of professionals, such as accountants, lawyers and stockbrokers, to support the fund management industry.

Local tax rate is not the main concern because fund is tended to invest in many other countries.

Managed funds are indirect investments known as collective, pooled or investment funds. Managed funds allow individual investors to pool their money with other investors who have similar investment goals. Investment professionals invest this pool of money in assets such as equities, fixed interest, real estate and/or cash. Investments in a particular fund will be made in line with the fund’s investment objective and strategy. Also, investors can invest in managed funds offering a wide scope of securities with a low minimum investment.

The Securities and Futures Commission has set standards on diversification in Hong Kong. These requirements are stated in the Code on Unit Trusts and Mutual Funds, and include : (1)A fund cannot hold securities issued by a single issuer with value more than 10% of its total net assets value. (2)A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.

A unit trust refers to a collective investment scheme pooling money from individual investors, with a large portfolio of securities managed according to pre-set investment objectives by professional fund managers.

Having long investment periods is the disadvantage of investing in unit trusts or mutual funds. It is because it is more risky.

Having various and diversified investment channels is the advantage of investing in unit trusts or mutual funds because the investment risk can be diversified.

Individual investors benefit from professional management, diversification, a broader range of opportunities, cost benefits, and convenience through managed funds.

Financial advising is a process where an individual moves towards meeting his personal and financial goals through the development and implementation of a comprehensive financial plan.

In many countries, the aging of the post-World War II baby-boomers has driven the growth of the financial advisory industry. This aging has been brought about by increased longevity in the majority of developed world populations. This large segment of the population is more highly educated and wealthier than preceding generations. The high average savings of such people represent a larger percentage of the population than earlier or subsequent generations, and their accumulated savings have stimulated demand for financial advisory services.

In many countries, the aging of the post-World War II baby-boomers has driven the growth of the financial advisory industry. This aging has been brought about by increased longevity in the majority of developed world populations. This large segment of the population is more highly educated and wealthier than preceding generations. The high average savings of such people represent a larger percentage of the population than earlier or subsequent generations, and their accumulated savings have stimulated demand for financial advisory services. The profession has gained importance in recent years as the financial and investment markets have become increasingly sophisticated.

The key benefits of managed funds are access to professional investment management services; and diversification. Fund managers can also invest in a broader range of securities, and usually faster and more cheaply, than individuals. Through managed funds, the investment range is broadened to include overseas investments. In Hong Kong, this is particularly relevant as the majority of authorized managed funds are based elsewhere, enabling the investor to choose the fund manager with the best skill set and local knowledge in the market in which he wants to invest.

Managed funds are indirect investments known as collective, pooled or investment funds.

Hong Kong attracts fund managers for several reasons, including: its central location in Asia; clear regulations on how to establish and become authorized in the local market, a just and equitable legal system, the English language (mandatory for conducting international business) and administration skills (needed to develop and maintain a viable operation); a simple and low-tax regime; a window to mainland China (and its mass market); a world class and technologically advanced communications system and telecommunication network; high liquidity in the local stock market; a plentiful supply of professionals, such as accountants, lawyers and stockbrokers, to support the fund management industry.

Hong Kong attracts fund managers for several reasons, including: its central location in Asia; clear regulations on how to establish and become authorized in the local market, a just and equitable legal system, the English language (mandatory for conducting international business) and administration skills (needed to develop and maintain a viable operation); a simple and low-tax regime; a window to mainland China (and its mass market); a world class and technologically advanced communications system and telecommunication network; high liquidity in the local stock market; a plentiful supply of professionals, such as accountants, lawyers and stockbrokers, to support the fund management industry.

Effectively, individuals delegate the investment management of their money to professionals, who exercise their own discretion as to how it should be invested.

Institutional investors: in Hong Kong, the main such investors include banks, insurance companies, fund managers and other financial institutions. They are called wholesale investor who has a larger investment amount and more complex investment goals.

An increase in interest rates by institutions will increase borrowers’ loan interest and therefore effectively lower their disposable incomes. This results in investment in the economy, which could lead to capital market slowdown.

In Hong Kong, the main institutional investors include banks, insurance companies, fund managers and other financial institutions.

High net-worth investors generally refer to individual whose personal financial assets and investment properties higher than other normal investors. Their investment experience, the amount of investment, education, investment performance are much better than that of normal investors.

Cost-push inflation: this is caused by increases in costs that translate into increases in wages and prices in the economy. Cost-push inflation can also be caused by relatively expensive imports (i.e. imported inflation).

RQFII is a policy initiative of mainland China, which allows qualified RQFII holders to channel renminbi funds raised in Hong Kong to invest in the Mainland securities markets.

QFIIs are foreign institutional investors who are allowed to invest in China A shares.

QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets.

An institutional investor is an organisation with a large amount of money to invest. A retail investor is an individual who purchases small amounts of securities for himself. A high net worth investor is an individual investor with a substantial amount of money to invest.

Today, the asset management market in Hong Kong is mainly divided into three categories: institutional, retail and private client markets. Institutional investors include active fund management companies, passive fund management companies (e.g. ETF), insurance companies, banks, sovereign wealth funds, endowment funds, treasury management functions of corporations and retirement schemes. This last mainly include the Mandatory Provident Fund (“MPF”) and Occupational Retirement Schemes Ordinance (“ORSO”) schemes.

All managed funds describe their products and investment strategies in a document. For managed funds catering to the retail and private client markets, this is called a prospectus. Prospectuses must have the prior approval of the SFC before being released to the public.

Fund management industry participants include investors, promoters, fund managers, trustee companies.

Kangneng Investment Co., Ltd. is the promoter of the fund. Promoters design, develop and maintain managed fund products. Essentially, they establish the managed fund and will oversee operations so that the products are marketable. This involves promoting their products either directly or indirectly via distributors.

Banks, life insurance companies, investment banks, specialist managed fund companies and some retirement fund trustees carry out the role of promoters.

To be authorised in Hong Kong, unit trusts must have a trustee. Sometimes promoters or fund managers nominate a trustee company to perform trustee duties for their trusts. They must be independent of the managed fund provider and, if domiciled outside Hong Kong, they must be authorised by the SFC to offer their products for sale locally. They must also have a paid-up capital of at least HKD10 million. The trustees are most likely to be an Authorized Institution established under the Banking Ordinance or a trust company established under the Trustee Ordinance.

Trustees act as custodian. The custodian is mainly responsible for protecting the fund assets. The assets are held in the name of the custodian on behalf of the unit-holders. However, a custodian is not responsible for supervising the performance of the fund manager. 

Trustees perform the following tasks: Act as custodian. The custodian is mainly responsible for protecting the fund assets. The assets are held in the name of the custodian on behalf of the unit-holders. However, a custodian is not responsible for supervising the performance of the fund manager. Registry. The trustee should maintain a register of the unit-holders. Settling transactions by issuing and redeeming fund units. Ensuring the managed fund provider complies with the conditions stated in the trust deed. Where a breach arises, the trustee has the power to replace the fund manager or other service provider responsible (e.g. an administration company). Carrying out their role in the interest of the unit-holders. Liaison. The trustee is also responsible for liaising with the fund management company on behalf of the unit-holders.

A distribution channel is a set of marketing intermediaries that operate between the managed funds provider and the customer. Distribution channels can be direct (where the customer interfaces directly with the provider) or indirect (through one or more types of intermediate channels).

Promoters rely on distributors to market their managed funds to clients. There are basically two types of distributors: direct (from the same or a subsidiary company of the promoter) and indirect (through an intermediary).

Some of the intermediaries are: Independent financial advisers; Life insurance agents; Banks; Discount brokers; Accountants and solicitors; Asset consultants.

Promoters rely on distributors to market their managed funds to clients. There are basically two types of distributors: direct (from the same or a subsidiary company of the promoter) and indirect (through an intermediary).

Banks have become a very important channel to distribute managed fund products. They distribute their own products and serve as an intermediary for other fund houses as well. Professional financial planners and wealth managers are housed in most branch offices of banks to provide the necessary financial advice or services in the process.

Discount brokers distribute managed fund products at a greater discount than the traditional distributors. However, no financial advice is provided.

Other people supporting the managed fund industry are Actuaries; Accountants; Custodians; Fund research houses and fund rating agencies.

Some investors may prefer face-to-face interactions with investment professionals, and the security aspect of internet transactions is still a concern. As the bulk of managed fund sales involve an intermediary, many managed fund providers have not embraced direct distribution over the internet.

There are some advantages to investing in mutual funds through the help of insurance agents or financial planners instead of going directly to mutual funds. The main reason is the “services” available to middle-income investors. A substantial percentage of Hong Kong investors come from a middle-income background. Their main investment goals are education for children and retirement. Unfortunately, these investors cannot afford the services of high-end wealth managers from private banks. In addition, they do not have the time or knowledge to construct an appropriate investment portfolio themselves. Through investment-linked products serviced by financial planning professionals from insurance companies or IFAs, they can enjoy personal financial planning services.

As most of these plans have a minimum saving period (five years is typical), or else incur a penalty, it is better in general for investors to employ such plans for long-term regular savings.

Retail Investors are more likely to purchase fund products through a bank or an insurance company.

Accountants do not sell and distribte fund products.

Today, the asset management market in Hong Kong is mainly divided into three categories: institutional, retail and private client markets.

There are five types of managed funds: unit trusts, mutual funds, umbrella trusts, MPF funds and hedge funds.

The 1994 World Bank study report, Averting the Old-Age Crisis: Policies to Protect the Old and Promote Growth, recommended a three-pillar approach to protecting the elderly. These pillars were: 1) a publicly managed, tax-financed social safety net for the old; 2) a mandatory, privately managed, fully funded contribution scheme; and 3) voluntary personal savings and insurance.

MPFA requires all employees aged between 18 and 65, including the self-employed, to participate in registered MPF schemes (except those remaining in the original ORSO schemes). These schemes rely on the fund management industry for investment products, which are simply a collection of investment schemes or managed funds.

All managed funds domiciled in Hong Kong are known as onshore funds. For example, all MPF schemes are required to be onshore funds. However, the SFC allows other managed funds to be domiciled outside Hong Kong provided that they meet certain SFC standards. They are known as offshore funds. This means managed funds do not need to be established in Hong Kong in order to service the local market.

QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets.

There are three reasons for the success of offshore financial center: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.

QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets.

QFIIs are foreign institutional investors who are allowed to invest in China A shares.

QFIIs are foreign institutional investors who are allowed to invest in China A shares.

A fund cannot hold more than 10 cent of its total net asset value in securities issued by a single issuer.

If the fund offers 4% interest to investors every year and also gets H+0.5% interest income, once the income is less than the interest promised, in other words, when H+0.5% is less than 4%, the zero coupon bond fund will record negative cash flow. Answer can be obtained by 4%-0.5% , we can see the break-even point is H=3.5%, and only option A amongst all answers is less than the break-even point, which will make the fund’s expenditure greater than income.