A simplified guide to Prudential’s With-Profits Fund
Balanced risk and the potential for growth
About this guide
This is a highly simplified description of our With-Profits Fund (the “Fund”) and our With-Profits plans and how they work.
Please read it together with our specific terms and conditions and the other information we offer, including our product brochures.
Prudential Hong Kong Limited (“Prudential”) has discretion in how the Fund is managed and invested as well as how (and if)
bonuses are declared. Our aim is to manage the Fund in an effective and prudent way.
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How our With-Profits Fund works
Prudential’s With-Profits Fund aims to provide long-term and stable returns in different market conditions. To do this, it invests in a
wide range of assets, such as equities, property, bonds and cash. This diversification means it is not fully exposed to one particular
asset class or market so its returns (profits and losses) are likely to be more balanced over the longer term.
We provide a range of With-Profits insurance plans with different levels of protection and savings. We invest your premiums into
the Fund along with other With-Profits policyholders’.
Risk/reward level of our With-Profits Plans
High
Direct Investment in stock markets
Emerging Market Funds
Equity Funds
With-Profits Plans
Reward
Corporate Bonds
Government Bonds
Bank Deposits
Low
High
Risk
Note: The diagram is only intended to be a general indicator of relative risk and reward, and may vary in certain circumstances.
Because our plans have different features and risk profiles, we divide the Fund into several sub-funds. For example, our
USD With-Profits Fund and HKD With-Profits Fund support our USD-denominated and HKD-denominated policies respectively.
Our With-Profits plans may also vary in investment strategy and so have different levels of investment return.
We distribute the profits of the Fund available among our With-Profits policyholders and shareholders; this is the “distributable
profit”. Your plan shares in the distributable profits of the Fund allocated to it through a regular bonus and/or a one-off final bonus.
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Key benefits
Potential growth through bonuses
We share the Fund’s distributable profits with you through bonuses.
Different With-Profits plans may have different bonus structures and/or investment strategies,
so your share of profits depends on the underlying Fund’s investment performance that we can
allocate to your individual plan.
You can find the declared bonus rates in your anniversary statement.
We give back 90% of distributable profits
We believe in being fair, objective and transparent. We divide the Fund’s profits between our
With-Profits policyholders and shareholders – no less than 90% of the distributable profit from
our With-Profits Fund will be allocated to With-Profits policyholders. The calculation of the
distributable profit of With-Profits Fund is performed separately and is not the same as that of
the total profits of Prudential Hong Kong Limited.
We ring-fence the With-Profits Fund from our other funds so your benefits are safeguarded and
so that only With-Profits policyholders benefit from it.
Smoothing investment volatility
The Fund holds back some of its investment returns in good years to support years in which
returns are lower. This smoothing effect means you are less affected by the peaks and troughs of
the market.
A substantial capital for flexibility and security
We have built up a substantial amount of ring-fenced capital (our Inherited Estate) which is
expected to grow over the years. This capital strength allows you to benefit from the guarantees
in our With-Profits plans and gives us greater flexibility to invest in a wider range of assets.
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Your investment manager
Prudential plc’s Eastspring Investments (“Eastspring”) manages most1 of our With-Profits Fund. They are one of the leading asset
managers with USD 146 billion2 assets under management and a presence in 10 countries.
•
Asia Fund House of the Year in 2015 – Asian Investor magazine
Active management for long-term, stable growth potential
Figure 1 shows how Eastspring actively manages the USD With-Profits Fund under different market conditions. For example,
during the 2008 financial crisis, Eastspring reduced its exposure to risky assets, such as equities, instead increasing its holding of
less risky assets, such as bonds. As the economy recovered, Eastspring bought equities again to give policyholders the potential
for greater return.
Figure 1: The USD With-Profits Fund’s3 investment mix through economic cycles
100%
Equities
Corporate bonds
Government bonds
Property
Others
80%
60%
40%
20%
t
ke
y
m
ar
ov
ris
15
20
on
Ec
20
13
Vo
l
om
at
il
ic
r
e
ec
tc
de
b
e
on
oz
Eu
r
11
20
er
is
s
isi
cr
ial
in
an
c
Gl
08
20
20
07
Be
f
or
e
ob
al
f
fin
an
c
ial
cr
isi
s
0%
Source of data: Eastspring Investments
1
2
3
A small portion of the fund is managed by BOCI-Prudential Asset management LTD.
Source: Eastspring Investments, as at 31 December 2016.
The graph shows our major USD sub-fund and is indicative only.
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Prudential’s With-Profits Fund portfolio
Our With-Profits plans may have different investment mixes because their investment strategies vary. Besides, the actual
exposure is also actively managed and adjusted in response to changing market conditions. Here is the investment mix of our
With-Profits Fund (as at 31 December 2016).
Table 2: The Fund’s currency mix
Table 1: The Fund’s asset mix
As at 31 December 2016
Asset mix
USD Fund
HKD Fund
Fixed-Income Type
As at 31 December 2016
Currency mix
USD Fund
HKD Fund
United States Dollar
73%
12%
Government bond
45%
9%
Hong Kong Dollar
4%
73%
Investment-grade bond
11%
51%
Euro
5%
4%
High-yield bond and
emerging-market bond
8%
9%
Japanese Yen
2%
2%
Others#
16%
9%
Other debt
0%
2%
100%
100%
Common stock
28%
29%
Property
5%
0%
Other equities*
3%
0%
100%
100%
Equity Type
Total
*“Other equities” mainly comprises alternative investments
like private equities.
Total
#“Others” mainly comprises British Pound Sterling (GBP),
Australian Dollar (AUD) and currencies from major
Asia countries.
Table 3: The Fund’s geographic mix
As at 31 December 2016
Geographical mix
USD Fund
HKD Fund
USA
69%
12%
Asia Pacific (excl. Japan)
16%
80%
Europe
6%
4%
Japan
2%
2%
Others^
7%
2%
Total
100%
100%
^“Others” mainly comprises Canada, Latin America and
Middle East & Africa.
Source of data: Eastspring Investments
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Need more details? Get in touch
Please refer to our With-Profits Plan brochure available at www.prudential.com.hk/withprofits for information (such as investment
philosophy and bonus philosophy) on your With-Profits Plan and the operation of a With-Profits Fund.
Please contact your financial consultant or call our Customer Service Hotline at 2281 1333 for more details.
Notes
These details are for reference only. They are not a contract between Prudential Hong Kong Limited and anyone else. If you would
like more details about any of the plans mentioned, please ask us for a sample of the policy document.
This “simplified guide” is for Hong Kong distribution only. It is not an offer to sell or solicitation to buy or provision of any insurance
product outside Hong Kong. Prudential Hong Kong Limited does not offer or sell any insurance product in any jurisdictions outside
Hong Kong in which such offering or sale of the insurance product is illegal under the laws of such jurisdictions.
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Prudential Hong Kong Limited
(A member of Prudential plc group)
8/F, Prudential Tower
The Gateway, Harbour City, 21 Canton Road
Tsim Sha Tsui, Kowloon, Hong Kong
Customer Service Hotline: 2281 1333
MKTX/QB0266E (04/17)
Corporate Website
www.prudential.com.hk