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Solutions For Your Clients
Passive Investing
2 Passive investing with HSBC Global Asset Management
IntroductionPassive investing has grown in scale and scope over the past two
decades. Today, an increasing range of product options means
that passive investment funds now offer more choice than ever.
We believe that this trend will continue with passive investments
accounting for an ever greater share of client portfolios.
HSBC Global Asset Management offers a wide range of passive
funds that have been developed over time to meet your and your
clients’ ever-changing needs. These include index tracker funds
and Exchange Traded Funds (ETFs).
We believe that our track record in managing passive
investments, which stretches back over more than 25 years,
coupled with our global reach, makes us a strong partner for
meeting your and your clients’ passive investment needs.
Our investment capabilities continue to evolve, with our new
product developments around alternative indexation and
proprietary cap-weighted indices demonstrating our commitment
to index-based investing.
A long heritage in passive 4
Our passive investment product range 6
Why invest with HSBC Global Asset 9 Management?
Conclusion 12
Passive investing with HSBC Global Asset Management 3
Passive investments are becoming more popular…In a global environment, where it remains challenging to
generate positive risk-adjusted returns for client portfolios, there
has been a significant rise in inflows into passive investments,
such as index tracker funds and ETFs, over recent years. These
passive products aim to offer investors low-cost, diversified,
simple and transparent market access.
While passive funds have seen strong investment flows over
the past few years, Europe’s scope for further growth in this
area looks strong, as the Continent remains some way behind
the US and Asia Pacific in terms of passive funds’ overall market
share. In Europe, passive funds (ETFs and index tracking mutual
funds) accounted for 16% of total allocations to equity funds in
2012, which is half the level seen in the US (32%) or Asia Pacific
(30%)1. As European investors align the way they invest closer
to the rest of the word, we expect this gap to narrow in passive
investors’ favour.
…and we expect this trend to continue.In mid-2013, management consultancy firm the Boston
Consulting Group (BCG) stated that it expects passive product
assets under management (AuM) to experience a compound
annual growth rate of around 10%-20% globally between 2012
and 2016.
Certainly, we believe that demand from advisers for new passive
solutions is continuing to grow, both as a result of recent
regulatory changes (such as the UK’s Retail Distribution Review)
and rising interest in passive investments from clients looking
to reduce the costs of managing their investment portfolios.
Consequently, we expect the trend of rising investment flows
into passive funds to continue over the coming years.
This expectation is supported by recent net sales data. For
example, when considering UK index fund net sales from 2009-
2013, we have seen an overall 83.1% increase2 in fund flows into
passive investments over this period.
For over 25 years HSBC Global Asset Management has been successfully offering passive investment strategies to clients. We are committed to building on more than a quarter of a century of our experience in this field to provide modern and competitive passive investment solutions. Our offering has adapted and evolved over time in line with changes in our clients’ investment requirements. Our new alternative indexation strategy, Economic Scale Indexation, is proof of our ongoing commitment, as well as to our ability to lead and shape the passive landscape.
Andy Clark,
Chief Executive Officer, UK HSBC Global Asset Management (UK), Ltd.
1 Source: Lipper 2013 European Fund Market Review, March 2013
2 Source: Lipper FMI
4 Passive investing with HSBC Global Asset Management
With rising interest in passive investing over the past few years,
there has been a spate of new entrants to the market and fund
launches. Throughout, HSBC Global Asset Management has
stood out as a provider with a strong track record in passive
investment management and a broad range of reliable passive
strategies. HSBC Global Asset Management has been providing
passive investment solutions since 1988, when we launched
our first index tracker fund in the UK (the American Index Fund).
As such, we now offer over 25 years’ experience in managing
passive investments. Since the launch of our first index fund,
our passive investment assets under management (AuM) have
grown over time to reach USD20.9billion1.
For example, our clients’ requirement for an index tracker product
offering greater liquidity was met by our development of a range
of Exchange Traded Funds (ETFs) in Europe that now comprises
28 funds investing in both developed and emerging markets.
Our first ETF, the ABF Hong Kong Bond Index Fund, was
launched in 2003 in Hong Kong. Since 2009, we have offered a
broad range of equity ETFs for sale across Europe.
We have since developed ETFs into areas that were previously
difficult to access for many investors (usually for reasons of cost),
such as in the case of emerging markets. We were the first asset
manager to offer a full physically replicated fund in Russia that
invests in local stocks (the HSBC MSCI Russia Capped UCITS
ETF, which was launched in July 2011).
A long heritage in passive
1988 1989 1990 1998 20 03 20 09 2010 2011 2012 2013 2014
We launched our first index fund in
the UK, the American Index
Fund. Tracking the S&P 500 index, it is one of our biggest
index trackers today
We launched 3 new index tracker funds, including
the FTSE All Share Index Fund, the HSBC European
Index Fund and the HSBC Japan Index
Fund
In 1994, we launched the HSBC
FTSE 100 Index Fund
In 1997 and 1998, we launched the HSBC FTSE 250 Index Fund and
the HSBC Pacific Index Fund
In Asia, we listed the first bond ETF in
Hong Kong, our Asian Bond Index
Fund
We listed our first ETFs in Europe on the LSE, including
the HSBC FTSE 100 UCITS ETF
We launched 13 new Emerging Market ETFs on
the LSE, cross-listed in
France, Germany and Switzerland
We listed 10 new ETFs on the LSE,
including the HSBC S&P 500
UCITS ETF.We also launched the HSBC UK Gilt
Index Fund
We launched a proprietary range of 26 alternative HSBC
Economic Scale Indices
The HSBC GIF Economic Scale
Index GEM Equity fund was the first fund launched in Europe to track
one of our proprietary
Economic Scale indices
HSBC S&P 500 UCITS ETF crossed the
USD1bn threshold
The HSBC ESI WORLDWIDE
EQUITY UCITS ETF and the HSBC WORLDWIDE
EQUITY UCITS ETF, the first ETFs tracking our
proprietary indices, are listed on the
LSE
Today, HSBC Global Asset Management manages 28 physical ETFs
listed on 4 exchanges in
Europe
1As at the end of August 2014. Source: HSBC Global Asset Management (UK)
HSBC Global Asset Management A strong index tracking heritage: 26 years of tradition in passive investment management
Passive investing with HSBC Global Asset Management 5
1988 1989 1990 1998 20 03 20 09 2010 2011 2012 2013 2014
We launched our first index fund in
the UK, the American Index
Fund. Tracking the S&P 500 index, it is one of our biggest
index trackers today
We launched 3 new index tracker funds, including
the FTSE All Share Index Fund, the HSBC European
Index Fund and the HSBC Japan Index
Fund
In 1994, we launched the HSBC
FTSE 100 Index Fund
In 1997 and 1998, we launched the HSBC FTSE 250 Index Fund and
the HSBC Pacific Index Fund
In Asia, we listed the first bond ETF in
Hong Kong, our Asian Bond Index
Fund
We listed our first ETFs in Europe on the LSE, including
the HSBC FTSE 100 UCITS ETF
We launched 13 new Emerging Market ETFs on
the LSE, cross-listed in
France, Germany and Switzerland
We listed 10 new ETFs on the LSE,
including the HSBC S&P 500
UCITS ETF.We also launched the HSBC UK Gilt
Index Fund
We launched a proprietary range of 26 alternative HSBC
Economic Scale Indices
The HSBC GIF Economic Scale
Index GEM Equity fund was the first fund launched in Europe to track
one of our proprietary
Economic Scale indices
HSBC S&P 500 UCITS ETF crossed the
USD1bn threshold
The HSBC ESI WORLDWIDE
EQUITY UCITS ETF and the HSBC WORLDWIDE
EQUITY UCITS ETF, the first ETFs tracking our
proprietary indices, are listed on the
LSE
Today, HSBC Global Asset Management manages 28 physical ETFs
listed on 4 exchanges in
Europe
We were one of the first providers of passive investment products in the UK. We have a long track record in managing passive investments and helped to develop this sector. Over the past 25 years, we have expanded our passive investment product range in line with the changing needs of clients around the world.
6 Passive investing with HSBC Global Asset Management
Our passive investment product rangeIndex Tracker FundsIndex tracker funds, which first became widely used in the
1980s, marked the initial step in the development of passive
investing.
As the name suggests, index tracker funds seek to track the
performance of an index as closely as possible. To do this, index
tracker funds match index exposures to each of the constituent
companies within that index. The fund will also mirror the
underlying index by rebalancing and reflecting corporate actions
in the same way and at the same time as the index.
Index tracker funds typically have lower costs than actively-
managed funds. This is because tracker funds’ investment
process is based on replicating the composition of a particular
index, rather than selecting securities according to fund
manager’s conviction, as is the case with most active funds.
Therefore, trackers do not have an added expense of maintaining
teams of dedicated fund managers and stock analysts whose
prime objective is to look into future performance prospects of
single companies. Instead, their portfolio construction process is
largely based on a quantitative, computer-based process.
The use of systematic quantitative approach also ensures trading
costs are kept to a minimum.
Index tracker funds are traded in the same way as a mutual
fund, either via a fund provider or fund platform, such as Fidelity
FundsNetwork, Cofunds and other leading platforms.
HSBC Global Asset Management has been managing index
tracker funds since 1988. Our current fund range is focused on
world markets, encompassing eight equity funds (three providing
exposure to UK equities and one each for European, Japanese,
Pacific, American and Worldwide – developed and emerging -
equities) and one UK bond fund.
As of end of August 2014, HSBC Global Asset Management had
over USD8.5 billion under management in its index tracker range.
Our largest fund is the HSBC American Index Fund had USD1.85
billion under management at the end of August 2014.
Index Tracker Funds range Exchange Traded Funds range
HSBC American Index FundHSBC FTSE 100 Index FundHSBC FTSE 250 Index FundHSBC FTSE All Share Index Fund HSBC European Index FundHSBC Japan Index FundHSBC Pacific Index FundHSBC UK Gilt Index Fund
HSBC ESI WORLDWIDE EQUITY UCITS ETFHSBC Euro Stoxx 50 UCITSHSBC FTSE 100 UCITSHSBC FTSE 250 UCITSHSBC FTSE EPRA/NAREIT DEVELOPED UCITSHSBC MSCI AC FAR EAST EX JAPAN UCITSHSBC MSCI BRAZIL UCITSHSBC MSCI CANADA UCITSHSBC MSCI CHINA UCITSHSBC MSCI Emerging Markets FAR EAST UCITSHSBC MSCI Emerging Markets LATIN AMERICA UCITSHSBC MSCI EMERGING Markets UCITSHSBC MSCI EUROPE UCITSHSBC MSCI INDONESIA UCITS
HSBC MSCI JAPAN UCITSHSBC MSCI KOREA UCITSHSBC MSCI MALAYSIA UCITSHSBC MSCI MEXICO CAPPED UCITSHSBC MSCI PACIFIC ex JAPAN UCITSHSBC MSCI Russia Capped UCITSHSBC MSCI SOUTH AFRICA UCITSHSBC MSCI TAIWAN UCITSHSBC MSCI TURKEY UCITSHSBC MSCI USA UCITSHSBC MSCI WORLD UCITSHSBC S&P 500 UCITSHSBC S&P BRIC 40 UCITSHSBC WORLDWIDE EQUITY UCITS ETF
HSBC Global Asset Management
Passive Investment Product Overview
HSBC Global Asset Management
Passive investing with HSBC Global Asset Management 7
* The Portfolio Composition of the HSBC ESI WORLDWIDE EQUITY UCITS ETF and HSBC WORLDWIDE EQUITY UCITS ETF are available on request, by email. Please go to www.etf.hsbc.com for more information.
Exchange Traded Funds (ETFs)Following the introduction of index funds to the retail market
in the 1980s, the emergence of ETFs in early 2000s in Europe
marked the next stage in the development of passive investment
products.
ETFs have the same investment aim as index tracker funds,
namely to replicate the performance of an index (whether
positive or negative) as closely as possible. Consequently, ETFs
also provide a low-cost investment solution by holding all or a
sample of the securities within the index, in the same proportion
as of the index. Similarly to index trackers, ETFs do not seek to
outperform their benchmark and hence do not need the structure
to support a stockpicking process, and the expense associated
with that. Therefore, similarly to index funds, ETFs’ running costs
are lower compared to actively-managed funds.
However, there are several key differences between ETFs
and index tracker funds. These are mainly to do with how the
funds are traded, how liquid they are and how transparent their
investment holdings are.
Whereas index tracker funds are traded and priced once a day, in
the same way as any standard mutual fund, ETFs are traded on
an exchange like a share of a company. As such, an ETF can be
bought and sold at any time during the trading day.
ETFs can also be a very liquid investment product, with this
liquidity derived from the liquidity of the underlying shares within
the index being tracked by the ETF.
One further difference is the level of transparency offered by an
ETF investment. Most ETF providers produce a daily list of the
securities held within the fund. Our range of 28 ETFs enables
our European clients to access Developed and Emerging equity
markets at global, regional or country levels. HSBC’s large
footprint in Emerging Markets has allowed us to develop a
successful broad Emerging Market ETF range to sit alongside
our Developed Market products. This combined offering allows
investors to access global equity markets and manage global
investment portfolios.
Every HSBC ETF publishes a full list of securities that it holds
on a daily basis*, in addition to up to date fact sheets on our
website: www.etf.hsbc.com.
As of end of August 2014, HSBC Global Asset Management had
over USD5.9 billion under management in its ETF range. Our
largest fund is the HSBC S&P 500 UCITS ETF had USD1.6 billion
under management at the end of August 2014.
Index Tracker Funds range Exchange Traded Funds range
HSBC American Index FundHSBC FTSE 100 Index FundHSBC FTSE 250 Index FundHSBC FTSE All Share Index Fund HSBC European Index FundHSBC Japan Index FundHSBC Pacific Index FundHSBC UK Gilt Index Fund
HSBC ESI WORLDWIDE EQUITY UCITS ETFHSBC Euro Stoxx 50 UCITSHSBC FTSE 100 UCITSHSBC FTSE 250 UCITSHSBC FTSE EPRA/NAREIT DEVELOPED UCITSHSBC MSCI AC FAR EAST EX JAPAN UCITSHSBC MSCI BRAZIL UCITSHSBC MSCI CANADA UCITSHSBC MSCI CHINA UCITSHSBC MSCI Emerging Markets FAR EAST UCITSHSBC MSCI Emerging Markets LATIN AMERICA UCITSHSBC MSCI EMERGING Markets UCITSHSBC MSCI EUROPE UCITSHSBC MSCI INDONESIA UCITS
HSBC MSCI JAPAN UCITSHSBC MSCI KOREA UCITSHSBC MSCI MALAYSIA UCITSHSBC MSCI MEXICO CAPPED UCITSHSBC MSCI PACIFIC ex JAPAN UCITSHSBC MSCI Russia Capped UCITSHSBC MSCI SOUTH AFRICA UCITSHSBC MSCI TAIWAN UCITSHSBC MSCI TURKEY UCITSHSBC MSCI USA UCITSHSBC MSCI WORLD UCITSHSBC S&P 500 UCITSHSBC S&P BRIC 40 UCITSHSBC WORLDWIDE EQUITY UCITS ETF
HSBC Global Asset Management
Passive Investment Product Overview
8 Passive investing with HSBC Global Asset Management
Alternative IndexationThe emergence of Alternative Indexation, also known as ‘Smart
Beta’, hailed yet another major development in the world of
index-based investments.
Alternative Indexation tries to address the issue of market
inefficiency, when the price of an asset does not always equal
its value. Particularly during market bubbles, the movements
of asset prices often appear less than rational and seem
disconnected to information flows. As a result, traditional indices,
which are based upon market capitalisation of its constituents,
tend to overweight over-priced companies and underweight
under-priced ones.
In contrast, Alternative Indexation strategies try to get around
this problem by moving away from capitalisation to determine
how much each constituent company should account for in an
index. They utilise a range of weighting techniques based not
on companies’ capitalisation but on other fundamentals. For
example, our new proprietary Economic Scale Indices weigh
stocks based on the economic contribution they make to the
global economy.
The HSBC Economic Scale Index series aims to generate
different risk adjusted returns compared to a traditional market
capitalisation weighted index over the long-term. We apply our
own rules-based methodology in index construction.
Indices are available on a single-country, regional or global basis.
The Economic Scale Index series consists of a total of 26 indices
(counting the different currencies available). It covers both
developed and emerging market companies worldwide and aims
to generate better risk-adjusted returns compared to a traditional
index over the long term.
We have launched funds which aim to track these indices and
expect to expand this range in the future.
For further information regarding our Alternative Indexation range, please go to www.global.assetmanagement.hsbc.com/amg/investment-capabilities/alternative-indexation. You can access daily index values and download the relevant factsheets and constituents.
Passive investing with HSBC Global Asset Management 9
We believe that HSBC Global Asset Management offers several
key strengths as an investment partner for you and your clients.
We have been present in passive investments for 25 years
and this long experience has enabled us to develop several
common values which we adhere to across our range of passive
investment solutions.
ExperienceHSBC Global Asset Management’s range of passive investment
solutions is managed by a dedicated and highly-experienced
investment management team based in London.
The fact that we have a common investment management
team working across our global passive investment product
range ensures that portfolio construction and risk management
processes are consistent across our family of index tracker funds
and ETFs.
Index selectionAcross our range of index trackers and ETFs, we believe
that index selection is a major contributing factor towards
ensuring strong investment performance. HSBC Global Asset
Management uses benchmark indices that comprise stocks
with a good level of liquidity. Where there is no widely-accepted
standard index (e.g. in markets such as Russia), we work with
index providers to construct a suitable index that balances high
levels of liquidity with broad market exposure.
Robust approach to portfolio constructionOur range of passive funds is based on a robust investment
process.
We start with what we call the “universe analysis” of the
underlying index, focusing mainly on fx allocation, rebalancing
costs, dividends and taxes. While defining the indexation
methodology, we consider client-specific requirements in relation
to the constraints of the fund. The objective of this exercise is to
achieve a minimal tracking error.
Why invest with HSBC Global Asset Management?
Stages in portfolio construction
Portfolio
Trading Analysis
Explicit and implicit costs assessed
Portfolio Construction
Liquidity, volume, index turnover, volatility, sector/market
cap composition)
Universe Analysis
FX allocation, rebalancing costs, dividends and taxes
Client-specific requirements
In order to decide on portfolio construction, we then look at
the investable universe with respect to liquidity, volume, index
turnover and volatility, as well as the distribution between large
and small cap stocks within it and its composition at the country,
sector and industry level. A matrix approach is then used to
manage factor risk in the portfolio and to ensure it has a neutral
position relative to the risk exposure implied by the benchmark.
We then carry out pre and post- trading analysis to ensure that
our portfolio is implemented in the most pragmatic and effective
way. Another part of this trading analysis, which is aimed at
minimising costs, is to estimate the actual costs, whether
they are explicit (taxes, custodian and execution) or implicit
(market impact).
10 Passive investing with HSBC Global Asset Management
Strong track record on performanceHSBC Global Asset Management has a strong record on both
tracking difference and tracking error (two key measurements of
fund performance) across our range of passive investment funds
when compared to our peers.
Our robust approach towards portfolio management, trading
and risk management all ensure that our passive funds are
able to track their benchmark indices closely, both in terms of
tracking difference and tracking error. Indeed, based on this
approach to efficient portfolio management, we have been able
to demonstrate that physical funds can deliver similar or better
tracking difference than synthetic funds over time without the
associated risks.
If we consider our range of ETFs for example, the tracking error
and tracking difference of both our S&P 500 UCITS ETF and our
MSCI Emerging Markets UCITS ETF compare very favourably
with our competitors.
The HSBC S&P 500 UCITS ETF is our flagship fund, which has
assets under management of over USD1.6 billion (as of end of
August 2014). This ETF is fully replicated and has a cost-efficient
ongoing charge figure (OCF) of just 9 basis points (bps). The
HSBC S&P 500 UCITS ETF has been very consistent in its
tracking accuracy since inception, with a tracking error of only 3
basis points since launch.
The HSBC MSCI Emerging Markets UCITS ETF also offers an
OCF of just 60bps, with HSBC Global Asset Management’s
longstanding presence on local equity emerging markets
ensuring that this fund also offers a low tracking error when
compared to its rivals.
While HSBC Global Asset Management’s approach is to
minimise tracking error as much as possible, it is widely accepted
that emerging markets funds will have slightly higher tracking
error figures when compared to developed markets. This has
much to do with the complexities around accessing and trading
the emerging market segments.
Risk managementRisk management is a key focus for HSBC Global Asset
Management. This not only occurs at the start of the portfolio
construction process, but continues on an ongoing daily basis.
Physical replication onlyWe use physical replication across our range of passive
investment products, as we believe this is the simplest
and most transparent investment strategy.
Where it is not considered cost-effective to buy all of
the securities in the underlying index, we use a process
known as optimisation, where we own a representative
proportion of securities in the underlying index. A good
case in point here would be broad indices comprising a
very large number of stocks, such as the MSCI Emerging
Markets Index or the MSCI World Index.
An alternative to physical is synthetic replication,
which uses swaps and other derivatives to mirror index
performance. Some studies have shown that synthetic
funds can offer a lower tracking error over time than full
physically replicated funds. However, we believe that the
risks associated with synthetic index-based funds – the
most important of which is counterparty risk – make
them a less attractive investment option.
As an example, if we consider emerging markets, HSBC
Global Asset Management has chosen to focus on
developing a physically replicated range of ETFs that is
high quality, straightforward and represents good value.
We have been able to achieve this thanks to our long
presence and expertise in emerging markets.
There are still some markets that pose challenges
for providers of physical-only ETFs. Over time, these
too might become available. For now, given the risks
associated with synthetic replication, we are comfortable
not having exposure to certain emerging markets which
cannot currently be managed on a physical basis without
compromising quality, simplicity and value.
Passive investing with HSBC Global Asset Management 11
Our passive investment management team is very experienced
in managing index solutions and uses a variety of processes to
ensure that our passive products track their benchmark indices
accurately, while minimising any tracking error.
To start with, net asset value and performance attribution are
calculated daily. The attribution calculation helps to identify
the source of any potential deviation in fund performance and
allows the team to monitor how closely the fund is tracking
its benchmark index. Other factors, such as the fund’s current
exposure to foreign currency, sectors or countries, are also taken
into account.
On an ongoing basis, HSBC Global Asset Management
monitors the impact of corporate actions, index rebalancing
(and associated trading costs) and exchange rate fluctuations
to ensure that tracking difference and tracking error are both
minimised and that our passive products are able to track their
benchmarks as closely as possible.
Focus on providing cost-effective investment solutionsHSBC Global Asset Management has developed a range
of high quality passive investment products that are
competitively priced.
HSBC Global Asset Management is able to use its global
footprint and existing local expertise to devise cost-effective
and focused passive investment products that offer a range of
market exposures, from global down to country-specific. Within
emerging markets, our trading scale enables us to negotiate
attractive dealing costs on local exchanges, which we can then
pass on to you and your clients via a lower ongoing charge
figure (OCF).
Our passive investment team is able to call upon the full
infrastructure and expertise of the wider HSBC group in
areas such as global markets, through to custodian and
administrative services.
All of which allows us to offer a broad range of passive
investment products which feature consistently low
management fees and ongoing charges when compared
to our peers.
The Emerging Markets AdvantageEmerging markets are accounting for a rising share of
international equity markets and consequently are playing
a growing role in asset allocation within global investment
portfolios.
HSBC Global Asset Management has extensive expertise
and a long track record in emerging market investment
and we can offer direct market access on many local
stock exchanges.
We are therefore able to go further in offering passive
investment products based on this fast-growing market
sector than other providers.
HSBC Global Asset Management has also been at the
forefront of innovation in offering physically replicated
passive investment solutions, with our range of Russian
and emerging market ETFs giving you and your clients
access to markets that were previously primarily available
via riskier synthetic ETFs.
Moreover, the tracking error and tracking difference
across our range of emerging market ETFs is very
competitive, compared to both physical and synthetic
funds.
The HSBC MSCI Russia Capped UCITS ETF (launched in
mid-2011) was the first Physical Russian ETF offered for
sale in Europe to invest in local stocks.
The HSBC MSCI MALAYSIA UCITS ETF and HSBC
MSCI INDONESIA UCITS ETF are also the first and only
physical ETFs in Europe on these exposures.
12 Passive investing with HSBC Global Asset Management
ConclusionHSBC Global Asset Management has been managing passive
investments since 1988. During this time, we have accumulated
valuable practical expertise in this fast-growing area of finance.
We were present in this market during a period of its rapid
evolution. We changed and evolved with it, and developed new
products - from index trackers in the 1980s, ETFs in the 2000s
and Alternative Indexation now.
Indeed, we believe that HSBC Global Asset Management is in a
strong position to take a leading position in passive investment,
offering you and your clients a broad range of complementary
passive investment solutions that can work alongside the active
portions of client portfolios.
Our range of passive investment products is competitively
priced and aims to deliver solid performance for you and your
clients. Our funds are all backed by the robust risk management,
well-established investment expertise and global resources of a
leading global asset manager with a well-known and respected
retail brand.
HSBC Global Asset Management’s global footprint has enabled
us to build a robust passive investment product range that
provides focused and cost-effective exposure to the markets
where your clients are looking to invest. All of our passive
investment products have been designed with you and your
clients in mind.
Passive investing with HSBC Global Asset Management 13
What to consider when investing in an index tracker fund and an ETF
Market risk
The value of investments and any income from them can go
down as well as up, and investors may not get back the amount
originally invested.
Currency risk
Where overseas investments are held, the rate of currency
exchange may cause the value of such investments to go down
as well as up.
Emerging market risk
Investments in emerging markets are by their nature higher
risk and potentially more volatile than those inherent in some
established markets.
Geographic risk
Some of the Index tracker Funds and Exchange Traded Funds
invest predominantly in one geographic area; therefore any
decline in the economy of this area may affect the prices and
value of the underlying assets.
Property risk
The value of interests in real estate companies may be affected
by changes in interest rates, tax laws and environmental laws
and regulations. While the value of interests in REITs may be
affected by the value of the property owned or the quality of the
mortgages held by the trust.
Russian risk
There are significant risks inherent in investing in Russia, which
could affect the value of investment. These include a lack of
clarity in laws and regulations in the following areas: investor
protection, banks and other financial services, the Russian
economic system, taxation, transaction settlement and fiduciary
duty and responsibilities of company management. Please see
the supplement for full information.
Investors and potential investors should read the relevant Key
Investor Information Document (KIID) and full prospectus and
supplement for full details of the risks involves prior to making a
decision to invest. If you have any doubt about the suitability of
an investment you should consult a financial adviser.
14 Passive investing with HSBC Global Asset Management
Important InformationThis document is intended for professional clients only and
should not be distributed to or relied upon by retail clients.
The material contained herein is for information purposes only
and does not constitute investment advice or a recommendation
to any reader of this material to buy or sell investments. Care has
been taken to ensure the accuracy of this document, but HSBC
Global Asset Management (UK) Limited accepts no responsibility
for any errors or omissions contained therein.
Fund information
The HSBC index tracker funds referred to are sub-funds of HSBC
Index Tracker Investment Funds, an Open Ended Investment
Company that is authorised in the UK by the Financial Conduct
Authority. The Authorised Corporate Director and Investment
Manager is HSBC Global Asset Management (UK) Limited.
HSBC ETFs are sub-funds of HSBC ETFs plc, an investment
company with variable capital and segregated liability between
sub-funds, incorporated in Ireland as a public limited company,
and authorised by the Central Bank of Ireland. The company
is constituted as an umbrella fund, with segregated liability
between sub-funds.
Shares purchased on the secondary market cannot usually
be sold directly back to the Company. Investors must buy and
sell shares on the secondary market with the assistance of an
intermediary (e.g. a stockbroker) and may incur fees for doing so.
In addition, investors may pay more than the current Net Asset
Value per share when buying shares and may receive less than
the current Net Asset Value per Share when selling them.
For investors in the UK
All applications are made on the basis of the current HSBC ETFs
plc Prospectus, relevant Key Investor Information Document
(“KIID”), Supplementary Information Document (SID) and Fund
supplement, and most recent annual and semi-annual reports,
which can be obtained upon request free of charge from HSBC
Global Asset Management (UK) Limited, 8 Canada Square,
Canary Wharf, London, E14 5HQ. UK, or from a stockbroker or
financial adviser. Investors and potential investors should read
and note the risk warnings in the prospectus, relevant KIID, SID
and Fund supplement. UK-based investors in HSBC ETFs plc are
advised that they may not be afforded some of the protections
conveyed by the Financial Services and Markets Act (2000), (‘the
Act’). The company is recognised in the United Kingdom by the
Financial Conduct Authority under section 264 of the Act.
Restrictions
The shares in HSBC ETFs plc have not been and will not be
offered for sale or sold in the United States of America, its
territories or possessions and all areas subject to its jurisdiction,
or to United States persons. Affiliated companies of HSBC Global
Asset Management (UK) Limited may make markets in HSBC
ETFs plc.
Index disclaimer
The EURO STOXX 50 is the intellectual property (including
registered trademarks) of Stoxx Limited, Zurich, Switzerland
and/or Dow Jones & Company, Inc., a Delaware corporation,
New York, USA, (the “Licensors”), which is used under license.
The securities based on the Index are in no way sponsored,
endorsed, sold or promoted by the Licensors and neither of the
Licensors shall have any liability with respect thereto.
All rights in the FTSE 100 and the FTSE 250 (the “Indices”)
vest in FTSE International Limited (“FTSE”). “FTSE®” is a
trademark of London Stock Exchange Group companies and is
used by FTSE under licence. The HSBC FTSE 100 UCITS ETF
and the HSBC FTSE 250 UCITS ETF (the “Products”) have
been developed solely by HSBC Global Asset Management
(UK) Limited. The Indices are calculated by FTSE or its agent.
FTSE and its licensors are not connected to and do not sponsor,
advise, recommend, endorse or promote the Products and do
not accept any liability whatsoever to any person arising out
of (a) the use of, reliance on or any error in the Indices or (b)
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claim, prediction, warranty or representation either as to the
results to be obtained from the Products or the suitability of the
Indices for the purpose to which they are being put by HSBC
Global Asset Management (UK) Limited.
“FTSE®” is a trade mark of the London Stock Exchange
Group companies, “NAREIT®” is a trade mark of the National
Association of Real Estate Investment Trusts (“NAREIT”) and
“EPRA®” is a trade mark of the European Public Real Estate
Association (“EPRA”) and all are used by FTSE International
Passive investing with HSBC Global Asset Management 15
Limited (“FTSE”) under licence). The FTSE EPRA/NAREIT
Developed® Index is calculated by FTSE. Neither FTSE,
Euronext N.V., NAREIT nor EPRA sponsor, endorse or promote
this product and are not in any way connected to it and do not
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The funds or securities referred to herein are not sponsored,
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with respect to any such funds or securities or any index on
which such funds or securities are based. The Supplement to
the Prospectus contains a more detailed description of the
limited relationship MSCI has with HSBC ETFs plc and any
related funds.
Standard & Poor’s and S&P are registered trademarks of
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Jones is a registered trademark of Dow Jones Trademark
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The S&P 500 and the S&P BRIC 40 are products of S&P Dow
Jones Indices LLC, and have been licensed for use by HSBC
Global Asset Management (UK) Limited. HSBC Global Asset
Management (UK) Limited‘s HSBC S&P 500 UCITS ETF and
HSBC S&P BRIC 40 UCITS ETF are not sponsored, endorsed,
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S&P, their respective affiliates, and neither S&P Dow Jones
Indices LLC, Dow Jones, S&P, their respective affiliates make
any representation regarding the advisability of investing in
such product(s).
HSBC Global Asset Management Ltd is the Sponsor for HSBC
Economic Scale Index - Worldwide and HSBC Worldwide Index.
As such, it maintains a segregation of duties from entities
acting as the calculation agent for the Index, and investment
manager for any products linked to this Index. HSBC Global
Asset Management Ltd maintains a Conflicts of Interest policy
to manage any conflicts of interest between HSBC Global Asset
Management Ltd and other members of the HSBC Group
or other affiliates. As the Index Sponsor, HSBC Global Asset
Management Ltd has policies and procedures in place to ensure
that it operates with transparency and accuracy in the Index
creation and management process.
This document is approved for issue in the UK by HSBC Global
Asset Management (UK) Limited who are authorised and
regulated by the Financial Conduct Authority. Copyright HSBC
Global Asset Management (UK) Limited 2014. All rights reserved.
www.assetmanagement.hsbc.com/uk
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ContactFor more information, please contact us:
Email: [email protected]
Telephone: +44 (0) 207 024 0435
Website: www.assetmanagement.hsbc.com/passive
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