A unit trust fund 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. There are many different types of funds, like Equity Fund, Bond Fund and Balanced Fund. Funds can be divided into different categories based on Sectors, such as Technology Fund, Health Care Fund and Utilities Fund; or based on geography, such as Global Fund, Single-Market Fund and Single-District Fund. Funds are professionally-managed by fund managers investing in a wide range of financial instruments according to investors’ choices and specific funds’ objectives.
Types of Funds
Funds can be broadly grouped into two types – Authorized Funds and Unauthorized Funds.

Authorized Funds
Authorized Funds must be authorised by the Securities and Futures Commission before they can be marketed in Hong Kong. They must meet the requirements of the Code on Unit Trust and Mutual Funds which covers investment restrictions, eligibility of the fund managers/custodians/trustees, information disclosure and operational policy. However, SFC authorisation is not an official recommendation of a fund nor does it guarantee a good return.
Unauthorized Funds
An Unauthorized Fund is a unit trust or mutual fund that has not been approved for sale to the general public in Hong Kong by the Securities & Futures Commission.
Categories of Funds
Balanced Fund
A unit trust or mutual fund that aims to provide some combination of growth, income, and conservation of capital through investment in a mix of stocks, bonds, and/or money market instruments.
Equity Fund
An equity fund primarily (usually not less than 70%) invests in equities with the aim of maximizing capital gains and returns and/or seeking value-added opportunities. The type of equities invested can range from domestic to international; and from blue-chips to small companies shares.
Bond Fund
A bond fund invests predominantly (usually not less than 70%) in bonds and other fixed income securities which can be issued by governments, municipal states, corporations, or other issuers. Bond funds generally focus on regular cash flow.
Money Market Fund
A money market fund invests in short-term money market, such as government securities, term papers, bank deposits; and other assets denominated in different currencies. The risk of investing in a Money Market Fund is generally considered to be low as the fund is generally restricted to investing in instruments of short maturity while earning an interest rate higher than that of savings deposits.
Warrants or Derivatives Fund
A warrant fund typically invests in excess of 70% in warrants or related instruments and these funds may be highly geared whereas a derivatives fund invests in geared financial instruments, such as futures, forward contracts and options to maximize capital appreciation.
Fund of Funds
A Fund of Funds is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities.
Why invest in funds?
A Variety of Selections
Investors can invest in a wide range of securities and products, including different markets and sectors through a fund. There are a variety of selections of funds in the market with different themes and investment objectives. Investors can choose funds which suit their own interests and investment expectations.
Access to Professional Investment Management Services
Investors can enjoy the services provided by fund managers. Funds managers will make decisions based on extensive research into the performance of individual stocks or other security issues as well as the fundamentals of the economies and market trends.
Risk Diversification
Divert the risk by investing in different markets with a wide range of products. Diversification may take different forms, e.g. along geographic or industry lines, different securities or issuers. A portfolio can help investors to spread out the risks and achieve better risk-return behaviour than individual securities.
Access to global investment opportunities
Due to high transaction costs, lack of time, information, and market access, individual investors may find it difficult to benefit from investment opportunities outside of Hong Kong. Through unit trusts, the investment horizon can be broadened because there are different types of funds which can provide investors with a very convenient and cost-effective way to access both local and overseas investment opportunities.
Key risks
Investing in single district
Some funds invest in a single country or district. It is likely that loss may be incurred as a result of economic recession.
Investing in single sectors
Some funds invest in single sector. For example, funds of energy industry are negatively affected by the decreasing prices of petroleum and coal and have performed worse than the ones from other industry.
Foreign exchange risk
Investors trading funds with underlying assets not denominated in Hong Kong dollars are also exposed to exchange rate risk. Currency rate fluctuations can adversely affect the underlying asset value, also affecting the fund price.
Frequently asked questions
What is Net Asset Value (NAV)?
Net Asset Value (NAV) is a value per share of a unit trust or mutual fund less any liabilities. NAV is calculated every market trading day close based on the underlying movement of its fund asset. Thus, NAV is the only value price on every trading day. Investors subscribe to a unit trust or mutual fund in a subscription amount on a trading day. Investors will be informed of the number of units on the next day when the NAV is calculated at market close.
How is the fund price set?
The fund price is calculated according to the change of asset prices in the portfolio after the market is closed, and the fund price will not be changed once the price is set every day. Investors will not know how many fund units they purchased until the settlement price is published.
Reference source: Hong Kong Investment Funds Association

If there is any inconsistency or ambiguity between the Chinese and English versions, the English version shall prevail.