HSBC Global Strategy Funds
A range of multi-asset passive investments
A world of investments
made affordable
For professional clients only
At the forefront of the evolution
Designed with the client in mind
Investment process
In today’s low interest environment, investors are looking
The HSBC Global Strategy Fund range is based on a
for alternative sources of attractive risk-adjusted returns.
dynamic asset allocation strategy. We understand the
Furthermore, the UK government’s pension reforms have led
risks of a ‘set and forget’ approach to asset allocation
to pension holders increasingly considering other strategies
and therefore re-run our portfolio construction process on
than annuities to save for retirement needs. However, the
a regular basis as well as monitoring our holdings daily.
volatility associated with certain asset classes, such as
These regular reviews ensure that the portfolios do not
equity only investments, is not for everyone. Investors often
drift away from their long-term risk profiles - Cautious,
have a more cautious stance when it comes to investment
Balanced or Dynamic. In addition, our asset allocation
risk and expect their portfolio to be managed in line with
construction is based not only on historical data but also
their individual risk attitude. And last but not least, investors
on our projections for market returns. This forward-looking
look for the price of an investment product to be extremely
approach to portfolio construction is crucial to make the
competitive, as costs eat into their net returns.
HSBC Global Strategy Fund range’s asset allocation robust
for times to come.
Our HSBC Global Strategy Fund range aims to meet all
these key client requirements. The range consists of three
We believe that passive vehicles are often the best way
portfolios, constructed to match your clients’ individual
to capture the desired asset allocation well and cost
risk budgets. Each portfolio is globally invested, across
efficiently. In the HSBC Global Strategy Fund range, we
developed and emerging markets, and holds exposure to
have a preference for HSBC managed products as they
global equities, global bonds and global property securities.
are typically the cheapest way to implement portfolio
To ensure we can deliver all of this at extremely low cost
exposure, and help keep fund costs low.
to the end investor, the HSBC Global Strategy Fund range
primarily uses passive investment products, namely index
Price
tracking funds and ETFs, to implement portfolio asset
allocation. The Ongoing Charges Figure (OCFs) range
The Ongoing Charges Figure (OCF) on the HSBC Global
between 0.17% and 0.20%.
Strategy Funds ranges between 0.17% and 0.20%. In our
Depending on your clients’ risk objectives, you can choose
opinion, this pricing makes the HSBC Global Strategy Fund
from one of the following three portfolios:
range one of the cheapest of the household names in
low-cost multi-asset investing.
Optimised for
a long-term
annualised
volatility of
Distribution
Technology
(DT) Risk
Ratings 1
HSBC Global Strategy
– Cautious Portfolio
4.5%
3
HSBC Global Strategy
– Balanced Portfolio
9.5%
5
HSBC Global Strategy
– Dynamic Portfolio
12.5%
7
Funds
To ensure that overall costs to the end client remain as
competitive as they are today, we have set up a process to
review the various cost components on a monthly basis, so
we can take action when necessary.
1 Distribution Technology as at September 2015
2
Track record
Accessibility
The predecessor of the HSBC Global Strategy Fund range
The HSBC Global Strategy Fund range will be available
(‘HSBC World Index’) launched in 2011 and has been using
through all major platforms, including Fidelity’s
the same portfolio construction process. Since launch, the
FundsNetwork, CoFunds and Old Mutual.
fund range has been able to build a strong track record in
The three portfolios have been reviewed independently
an array of different market conditions. For example, the
and risk profiled by Distribution Technology. The HSBC
medium risk portfolio, the ‘Balanced’ portfolio, has provided
Global Strategy Cautious portfolio is risk rated 3, the HSBC
strong annualised net returns of 8.2% since inception (as at
Global Strategy Balanced portfolio is 5 and the HSBC Global
July 31, 2015).
Strategy Dynamic portfolio is 7.
Performance on a risk-adjusted basis is equally strong,
Our new funds can also be found on Defaqto where they are
as the following chart shows:
currently rated 5 diamonds.
HSBC World Index portfolios: proven
risk-adjusted returns
HSBC Global Asset Management
HSBC Global Asset Management is the HSBC group’s
15%
investment management arm. The firm has a strong
MSCI World (GBP)
background in managing multi-asset funds, having done so
Annualised performance
for the past 20 years. We have over USD447bn of client
assets under our management, with 60bn in multi-asset
10%
products globally and £25bn in the UK only2.
Global Strategy Dynamic
For us at HSBC Global Asset Management, multi-asset
Global Strategy Balanced
solutions form a globally consistent investment proposition
based on active asset allocation and cost-efficient fulfilment.
5%
Global
Strategy
Cautious
Our capabilities in this area are supported by a dedicated global
FTA British
Govt All Stocks
research platform comprising over 500 investment professionals.
HSBC Global
Strategy Funds
0%
5%
10%
15%
Daily annualised volatility
Strategic Asset Allocation

Tactical Asset Allocation

Source: HSBC Global Asset Management, DataStream, Bloomberg, August 2015.
(1) Global Strategy returns are calculated from inception on Oct 17 2011 to July 31
2015, net of OCF, then annualised.
(2) MSCI World and FTA British Govt All Stocks indices are in GBP, total return, from
October 17 2011 to July 31 2015.
(3) Volatility is based on daily total returns, in GBP, annualised, from October 17 2011
to July 31 2015.
Diversification
Global
(4) Sharpe Ratio calculated using gross, since inception performance: Sharpe Ratio =
(Annualised net return – rfr) / Annualised volatility, where rfr = 0.19%
Performance information above refers to the past and should not be
seen as a guide to the future.
Rebalancing
Cost
Quarterly
OCF = 0.17% to 0.20%
2 Source: HSBC Global Asset Management as at 30 June 2015.
3
Global exposure without paying the earth
HSBC Global Strategy Fund range gives you and your clients
As always the value of investments and any income from
access to a low cost, highly diversified, global, risk-focused
them can go down as well as up and clients may not get
investment proposition, HSBC Global Strategy Funds access
back the amount originally invested. Where overseas
the markets primarily through passive investment vehicles,
investments are held the rate of currency exchange may
such as index trackers and ETFs. When it is cost-efficient to do
also cause the value of such investments to fluctuate. Stock
so, the funds invest in financial instruments directly, such as
market investments should be viewed as a medium to long
government bonds.
term investment and should be held for at least five years.
With HSBC’s Global Strategy Funds your clients will
benefit from the expertise of our well-resourced and highly
qualified investment teams managing the Funds and their
asset allocation.
HSBC Global Strategy Funds
Cautious Portfolio
Balanced Portfolio
Dynamic Portfolio
Total Expected
Total Expected
Total Expected
Weights
Weights
Weights
Global Equity
20.0%
60.0%
75.0%
US Equity
11.2%
33.6%
41.9%
Euro Equity
3.4%
10.2%
12.8%
UK Equity
1.5%
4.5%
5.6%
Japan Equity
1.7%
5.0%
6.3%
GEM Equity
2.2%
6.7%
8.4%
Fixed Income
74.0%
34.0%
19.0%
Global Government Bonds (hedged to GBP)
42.0%
5.0%
0.0%
Global Corporate Bonds (hedged to GBP)
32.0%
29.0%
19.0%
Alternatives
5.0%
5.0%
5.0%
Property
5.0%
5.0%
5.0%
Liquidity
1.0%
1.0%
1.0%
Cash
1.0%
1.0%
1.0%
100%
100%
100%
Asset Class
Source: HSBC Global Asset Management, September 2015. Note: for illustrative purposes only. Characteristics and weightings are for illustrative purposes only,
are subject to change over time taking into account any changes in markets.
`` HSBC index-tracking vehicles
are used where possible
`` Use of ETFs for asset classes where
`` Direct investment are made where
there are no HSBC index trackers
the asset class can be replicated
4
Well-diversified Funds for three distinct risk profiles
At HSBC Global Asset Management, we want to make
We adjust exposures to asset classes, regions and
investment decisions simpler for clients. So our HSBC
currencies to identify the optimal long-term portfolio
Global Strategy Fund range give investors the ability to
positioning for the specific risk profile.
choose a single fund that will give them comprehensive
Projections for asset class returns are used to make asset
access to the world’s financial markets. All you need to
allocation sufficiently robust for times to come.
do with the customer is make one decision – on their risk
attitude – and leave the rest to us.
We implement our diversified investment strategy primarily
by using index tracking funds. Where there isn’t a suitable
We have created three distinct portfolios which we
index fund, we use ETFs. In the case of government bonds,
believe will meet the risk/return needs of most investors.
we invest directly in the asset class because we believe it
We undertook extensive consumer research to establish
is the most cost-efficient way of implementing our desired
how many core investor segments there are as well as
exposure at present. To gain the best value for investors,
each segment’s attitude to investment risk. The valuable
we use HSBC index tracking funds where available, and
insights uncovered have been used to create these highly
a selection of other products from other hand-picked
sophisticated multi-asset solutions, which we have fine-
investment managers. Full details of the current holdings in
tuned to be closely aligned to consumers’ risk preferences.
the Funds will be available on the individual factsheets.
Reasons to invest in the HSBC Global Strategy Fund range
1. Robust asset allocation
Asset allocation construction is a core competency of the multi-asset team. Our team’s strategic
asset allocation is based on HSBC’s tried-and-tested quantitative methodology. This process is
re-run at least quarterly, with a qualitative overview also taking place. This way we ensure
that the HSBC Global Strategy Fund range remains in line with their long-term risk profiles
regardless of the market environment.
2. Low overall investment costs
HSBC Global Strategy Funds’ asset allocation is the key driver of investment
performance. Therefore, our aim is to capture the asset allocation well and in a
cost-efficient manner. In the HSBC Global Strategy Fund range we focus on using
passive funds as a cheap way to implementing required market exposures.
3. Global diversification
Through a single investment solution, the portfolio provides access to a
well-diversified portfolio, invested globally across equities, bonds and
property securities.
4. Ongoing reviews of portfolio positioning
All of our positions are reviewed daily to ensure actual allocations
are in line with intended asset class weights.
5. Risk tolerance based on end-customer research
We undertook extensive research to evaluate fully the risk attitude of
each of the three core customer types: cautious, balanced and dynamic
investors. The HSBC Global Strategy Funds were constructed to deliver to
these three risk profiles. Customer requirements were analysed together
with an external consultant in 2015.
6. Strong governance
The HSBC Group employs strong governance standards across
all of its investment funds so when we include an HSBC product
in the HSBC Global Strategy Fund range we can be sure that our
high standards of governance are being met. And, when we use
products from other providers, we employ the same high standards
of due diligence.
5
How we manage the Funds – our process
We have a rigorous process to ensure that our fund
This is a sophisticated process that uses advanced quantitative
objectives are met using only the most appropriate
screening processes and analysis to come up with the
asset classes.
optimum mix of investments for each of the three funds.
1. Strategic Asset
Allocation
2. Tactical
Asset
Allocation
3. Implementation
1. Strategic Asset Allocation
2. Tactical Asset Allocation
3. Implementation
`` Blending of asset classes, regions
`` Reflecting shorter term views
`` Identification of the most appropriate
and currencies to identify the optimal
and asset class preferences in
long-term Funds’ positioning for the
the Funds
specific risk profile
`` Reviewed a least quarterly
fulfilment approach for each asset class
`` Strong focus on cost efficiency
`` Rationale for TAA positioning is
reviewed at least monthly
Source: HSBC Global Asset Management, September 2015.
6
`` Fund positioning monitored daily
How we manage asset allocation
1. From year to year, asset classes perform differently.
Get your asset allocation wrong and any returns from the
individual indices being tracked can be completely wiped out.
2.Diverse asset classes offer returns that are not
perfectly correlated.
Our approach to asset allocation emphasises targeting
a realistic long-term real return after inflation, and which
The diagram below shows the variation of asset class
rewards investors for the risk being taken. Our asset
returns from year to year. This underlines our view that asset
allocation strategy is built on two simple facts:
allocation is critical to a successful investment strategy.
Which asset will perform best each year?
Best
performing
asset class
in year
Worst
performing
asset class
in year
28.43
50.46
25.03
37.43
28.93
59.48
24.71
15.57
22.84
25.00
23.22
Property
17.44
28.58
16.30
16.57
12.81
59.39
22.94
8.19
18.75
7.31
13.86
Emerging equities
15.07
23.04
11.38
7.72
11.52
27.00
19.81
5.96
18.14
2.35
12.07
Hard currency EMD
14.69
18.46
9.99
6.79
6.10
24.79
15.87
5.13
13.42
0.51
8.70
Global high yield credit
14.47
13.74
5.83
6.14
-3.15
16.45
15.00
2.93
11.49
0.39
8.02
Local currency EMD
8.66
7.93
4.84
6.08
-9.94
15.81
12.34
0.84
11.42
0.19
7.48
Global investment grade credit
7.97
6.58
3.29
5.27
-17.39
10.10
7.46
-1.23
10.93
-3.94
4.29
Global government bonds
7.46
5.20
2.73
3.79
-27.37
1.47
7.20
-4.31
4.74
-4.08
2.71
Developed equities
6.60
4.86
1.19
2.20
-28.88
1.33
3.62
-5.32
2.70
-5.78
0.54
UK government bonds
4.62
4.78
0.69
-8.17
-35.18
-1.16
0.69
-17.57
0.89
-10.76
0.24
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘13
‘14
‘12
Cash
Year
Past performance is not an indication of future returns.
Source: 3 month GBP LIBOR (Cash), BofA Merrill Lynch Global Corporate Index Hedged GBP (Global Investment Grade Credit), MSCI World GBP (Developed Market Equities),
MSCI EM GBP (Emerging Market Equities), Citigroup WGBI All Mat Hedged GBP (Global Government Bonds), FTSE Government UK Gilts All Stocks (UK Government Bonds), FTSE
EPRA NAREIT Dev GBP (Property), BofA Merrill Lynch Global High Yield Index Hedged GBP (Global High Yield Credit), BofA Merrill Lynch US Dollar Emerging Markets Sovereign
Plus Index Hedged GBP (Hard Currency EMD), JPM GBI-EM Global Diversified Composite GBP (Local Currency EMD). As at 31/12/14.
7
Your contacts for more information:
Gareth Harries
David Owen
London and South West
Midlands and Wales
E-mail:
gareth.harries@hsbc.com
E-mail:
david.owen@hsbc.com
Mobile:
+44 (0)7584 403 037
Mobile:
+44 (0)7920 410 779
James Fouracre
Simon Page
London and South East
North and Scotland
E-mail:
james.fouracre@hsbc.com
E-mail:
simon.page@hsbc.com
Mobile:
+44 (0)7468 704 455
Mobile:
+44 (0)7584 401 171
This document is intended for Professional Clients only and should not be distributed to or relied upon by Retail Clients. The
views expressed above were held at the time of preparation and are subject to change without notice. Any forecast, projection or
target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no
liability for any failure to meet such forecast, projection or target. The HSBC Global Strategy Funds are sub-funds of HSBC OpenFunds,
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. All applications are made on the basis of the
HSBC OpenFunds prospectus, Key Investor Information Document (KIID) and most recent annual and semi annual report, 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 the local distributors. Investors and potential investors should read and note the risk warnings in the
prospectus and relevant KIID and additionally, in the case of retail clients, the information contained in the supporting SID.
Any performance information shown refers to the past and should not be seen as an indication of future returns. To help improve our
service and in the interests of security we may record and/or monitor your communication with us. HSBC Global Asset Management
(UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services of
the HSBC Group. 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 2015. All rights reserved. 26718CP ED/0915 FP1498 EXP 08/03/16