Last Word
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Square Mile
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Fund Buyer
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Terms & Conditions
strategy directly from the fund manager.
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The HSBC Global Strategy Portfolios are a suite of five risk-focused multi-asset funds which provide cost efficient access to global markets. The portfolios are globally diversified across the key global regions and asset classes, employ an active asset allocation strategy and primarily use passive funds to implement the asset allocation. Global Strategy’s ongoing charge fees range from 16 to 21 basis points.
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LOCATION_ London
A value-for-money volatility dampener
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“To meet its clearly defined volatility objective, each fund will use a different combination of regional equities and REITs, combined with global government bonds and investment grade credit to dampen volatility.”
YEARS IN INDUSTRY_ 18
To view Square Mile Investment Consulting and Research Ltd's disclosure on their involvement on this site, please click here.
JOB TITLE_ Head of risk-based solutions research
The HSBC Global Strategy Portfolios are a range of five risk targeted funds which are managed to specific long-term volatility targets. The funds invest in global equities, global fixed income securities, REITs and cash. They will invest either directly in underlying securities, as is the case for the global government bond exposure, or in passive funds. Passive exposure comes from HSBC’s index tracker funds as well as exchange traded funds from external providers.
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COMPANY_ Square Mile Investment
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ALEX FARLOW_
ALEX FARLOW
Last Word
Perspective
Many investors understand the appeal of multi-asset investing and the return opportunities a globally diversified approach can provide, whilst at the same time spreading investment risk. However, those investors with a strong focus on costs may shy away from pooled fund solutions.
The result is they may end up with a static and less diversified asset allocation. It doesn’t have to be that way.
Step forward the HSBC Global Strategy Portfolios, a range of five multi-asset funds which are diversified across the main asset classes and global regions, developed and emerging, and tailored to different investor risk attitudes.
With OCFs ranging from 16 to 21 basis points (bps), the Cautious, Conservative, Balanced, Dynamic and Adventurous Portfolios employ an active asset allocation strategy. Asset allocation is regularly reviewed and adjusted to ensure the funds remain in line with their long-term risk profiles. To implement their asset allocation, the funds primarily invest in passive vehicles.
“This product range may be a good fit for an investor who is looking for global diversification, but at the same time has a strong focus on costs.” explains Meike Bliebenicht, lead product specialist on the HSBC multi-asset range.
With the Cautious, Balanced and Dynamic Portfolios launched in 2011 and the Conservative and Adventurous offerings added in August 2017, Bliebenicht says while the Global Strategy range has a strong focus on costs, no shortcuts are taken when it comes to managing their asset allocation.
To take advantage of shorter-term opportunities the team can also tactically tilt the portfolios to different assets and markets. Bliebenicht says the tactical asset allocation is reviewed on a regular basis by HSBC’s investment team in London. For example, at present the team have a preference for equities over bonds at broad asset class level, and within equities have tilted the portfolio toward some regions, such as emerging markets.
The third part of the puzzle is implementation of the desired asset allocation into the different portfolios. To gain exposure to these markets, and to keep costs low, the portfolios primarily use index tracking funds and ETFs, with the preference being the use of HSBC tracker products.
“We do not exclusively use HSBC managed vehicles to implement our asset allocations, however, we have the advantage of being able to access our own funds at zero management fee, making these a cost-efficient way to capture market exposure,” Bliebenicht explains.
“Global Strategy is a core investment solution which provides access to all of the key global economies and main asset classes at very competitive pricing”, she says. “It is a one stop solution where investors can rest easy that once they have chosen their risk profile, the portfolio will be regularly reviewed and adjusted to ensure it remains well positioned for its risk profile over the long-term.”
The cost efficient multi asset option
AUTHOR_ ADAM LEWIS
“Asset allocation is the main driver of risk and returns in the multi-asset world and therefore, we have to be active when it comes to the construction process,” she says, “otherwise we run the risk of exposing the portfolios to risks that were never intended.”
“The asset allocation process we use to construct these funds is exactly the same as we use for all HSBC global multi-asset portfolios and we regularly review the allocations,” she says. “We use passive vehicles to implement this asset allocation, as they allow us to capture our desired market exposure well and in a cost-efficient manner. We are not saying that active management does not make sense, it is just different client demand that we are delivering to.”
For the Global Strategy range, the HSBC multi-asset team use a three-step investment process. This allows the team to reflect in the asset allocation their expectations for asset class returns and economies, over both the long and short-term.
Firstly, the team construct each portfolio’s long-term asset mix, depending on the chosen risk profile. Regular reviews and adjustments of the portfolio’s long-term positioning ensures that investors are exposed to the right mix of different assets.
Kames Global Diversified Income Fund
Fund
Vincent McEntegart has been managing the Kames Global Diversified Income Fund for six years and is well-versed to the changeable financial climate. Curabitur blandit tempus porttitor. Aenean lacinia bibendum nulla sed consectetur.
Manager
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Unlike most other risk-targeted funds HSBC Global Asset Management takes a truly global approach to asset allocation. This is highlighted when one considers that only about 5-10% of the equity element of the portfolio is invested in the UK. The approach which is more market cap focused and therefore shuns a home bias, means the portfolios tend to have a higher exposure to the US equity market and therefore the US dollar.
This feature has been a significant tailwind for the funds over the last few years as the US equity market has been one of the strongest performing regions. We are agnostic as to whether this constitutes an appropriate approach to portfolio construction, believing that overtime any number of approaches may prove beneficial.
However, the important fact in this case is that this factor has worked in the funds’ favour more recently and that the chances of this persisting over the coming years is somewhat lower. The focus on low cost implementation via passive investing has also been a helpful feature for the funds over the last few years, as passive funds have tended to outperform their active counterparts. Again, it is worth bearing in mind that active investing is likely to have its day in the sun again and that the potential for this is significantly higher than it was a few years ago.
AUTHOR_ ALEX FARLOW
"A cost-efficient range of multi-asset funds which are regularly reviewed to ensure they remain aligned to a defined set of volatility targets."
We think the structure and design of the funds will prove an appealing trait for many investors. To meet its clearly defined volatility objective, each fund will use a different combination of regional equities and REITs, combined with global government bonds and investment grade credit to dampen volatility. It is probably worth highlighting that, whilst the targeted level of volatility is explicit in the funds’ objectives, most investors are unlikely to have a clear understanding of what the investment journey of a fund with, for example, an annualised volatility target of 6.5% or 9.5% is likely to look like and therefore the level of return they could potentially expect over the longer term. We believe HSBC Global Asset Management could do more in this regard to help manage expectations around the potential investment journey and return profile.
The vast majority of returns will be driven by each portfolio’s long-term asset allocation. The approach taken to building this asset allocation is, we believe, a sensible one because it does not simply allocate capital to areas of the market which have historically been strong in the belief that this trend will continue. Whilst an assessment of the historic risk and return of each asset class is considered, a more neutral assessment is also considered which attempts to dampen the effect that short-term price movements can have on longer-term expectations. This helps to keep the allocation more robust and stable over time.
When HSBC Global Asset Management relaunched its Global Strategy fund range in 2015, it laid down a clear marker in the sand for other multi-asset funds. With an ongoing charge figure of approx. 0.2% across the range, we believe the funds represent very compelling value for money. Indeed, when one considers that investors benefit from both strategic and tactical asset allocation and exposure to a broad range of global assets, we think they are getting a lot of “bang for their buck”.
The low price point does mean that the investible universe is more restricted when compared with some other multi asset strategies, but we do not feel that this acts as an impediment over the longer term to the funds meeting their objectives.
There is no star manager approach at HSBC Global Asset Management and the well-resourced global multi-asset team works in a collegiate manner and follows an institutional-based approach, with decisions made by well-informed groups rather than by individuals. This leads to all funds which the team manages being invested in a consistent manner. This consistency is not only applied across the group’s broader multi-asset offerings, but also within this risk targeted range. This means advisers benefit from the knowledge that each of the portfolios will be managed in a similar manner thus ensuring that their clients, regardless of risk profile, have funds that demonstrate a consistently applied approach.
A marker in the sand
Tom Poulter, head of quantitative research at Square Mile.
Square Mile
Perspective
Fund buyers' perspective
The cost-efficient investment solution
Market Reaction
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Jonathan Woo_ investment research_ Santander Asset Management
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“There has been considerable structural reform in giant markets like India, China and the Pacific Tiger economies. It’s a time of change from investment in infrastructure to innovation. Baillie Gifford looks for superior growth, meaning its style is suited to this change. They make some debatable valuations but are valiant investors and can spot businesses with great fundamentals early. They are picking the sort of businesses that have the potential to steam ahead and accrue multiple years of earnings growth for investors.”
Scott Spencer_ Investment Manager_ F&C Multi-manager solutions, BMO Global Asset Management
“The key rationale behind Income Maximiser is the delivery of a 7% yield. The use of derivatives in the portfolio means the upside is therefore limited but we find the fund is a lower beta way of getting equity exposure as well as some downside protection.”
“The fund managers of Schroder Income [Nick Kirrage and Kevin Murphy] pick the stocks, and the derivatives for Income Maximiser are then written accordingly. We like the fact that derivatives provide a diversification element and we have a great deal of confidence that the derivatives are run by a separate team. It is a very different skill set and is a USP of theirs.”
Richard Philbin_ CIO_ Wellian Investment Solutions
Mona Shah_ head of collectives_ Rathbones
“After years of lacklustre performance, Asia and the emerging world experienced a resurgence last year, driven by rising commodity prices and a fundamental shift in favour of more cyclical sectors like financials, energy and materials. But many of the fortunes of Asia and emerging markets are driven by sentiment from the West, which was negatively affected by the US election in November. While markets have regained their initial losses, we’ve had no more clarity on what Donald Trump’s policies will mean with regards to global trade and protectionism. For this reason, we believe that diversification should offer benefits in a period where markets are likely to be volatile. In addition, the economies in Asia-Pacific are showing increasing dependence on domestic demand, and we believe funds exposed to growing demand from consumers in China, for example, may be better placed to withstand headwinds from the US.”
Robert Shepherd_ Director_ Bright & Co.
We were on the lookout for something different and, let’s face it, 4% or lower is the norm in this environment. So this is attractive”
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Achievable, sustainable, reliable
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Fund
Manager
Perspective
Fund Buyer
Perspective
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to bring you insight, research and market views
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Axis analyses the fund from four perspectives
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Lead product specialist, HSBC Global Asset Management, Global Multi-asset Solutions
The HSBC multi-asset capability provides broadly diversified solutions across various different asset classes for wholesale and institutional investors, following total return, benchmarked or absolute return approaches. In addition to the Global Strategy range, HSBC Global Asset Management’s multi-asset team also manage HSBC’s flagship product World Selection.
Meike Bliebenicht
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The HSBC Global Strategy Portfolios are a range of five risk targeted funds which are managed to specific long-term volatility targets. The funds invest in global equities, global fixed income securities, REITs and cash. They will invest either directly in underlying securities, as is the case for the global government bond exposure, or in passive funds. Passive exposure comes from HSBC’s index tracker funds as well as exchange traded funds from external providers.Scroll down to read more...
JOB TITLE_ Head of risk-based
solutions research
"A cost-efficient range of multi-asset funds which are regularly reviewed to ensure they remain aligned to a defined set of volatility targets."
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market viewpoints, together with the
to bring you incisive analysis, research and
Fund Manager’s own investment strategy.
Axis interrogates the fund from four perspectives
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return approaches. In addition to the Global Strategy range, HSBC Global Asset Management’s multi-asset team also manage HSBC’s flagship product World Selection.
The HSBC multi-asset capability provides broadly diversified solutions across various different asset classes for wholesale and institutional investors, following total return, benchmarked or absolute
The HSBC Global Strategy Portfolios are a range of five risk targeted funds which are managed to specific long-term volatility targets. The funds invest in global equities, global fixed income securities, REITs and cash. They will invest either directly in underlying securities, as is the case for the global government bond exposure, or in passive funds. Passive exposure comes from HSBC’s index tracker funds as well as exchange traded funds from external providers. Disclaimer »
“This is a passive strategy for investors looking to have a diversified portfolio investing in global equities and bonds. Whilst it is multi asset the focus is primary bonds and shares, so a fairly straightforward proposition. Charges are kept low which is important in a passive solution, this is achieved by using in house funds where possible. The fact there is a range of solutions for different level of risks for investors will appeal as it means investors can move from one to another as they get older and risk appetite comes down. This range is likely to be of interest to advisers looking for simple solutions for their clients. ”
Adrian Lowcock_ Head of Personal Investing_ Willis Owen
Darius McDermott_ Managing Director_ Chelsea Financial Services
“These are cost-efficient portfolios which principally invest in passive investments – and some direct offerings. The funds are structured as unfettered fund of funds but are typically invested in HSBC tracker funds where possible. Each portfolio is structured to offer a level of risk based on what an investor is willing to take. The three funds with a longer-term track record have performed well in what have been strong performing markets, but for these funds it is all about offering risk-adjusted returns rather than beating their peers.”
Ben Yearsley_ Senior Director_ Shore Financial Planning
“The Global Strategy Range from HSBC provides an easy, simple and cost-effective way to access global markets in a diversified manner. As I prefer a more hands-on approach it this would not be my personal choice, but for those investors who want a hands-off passive approach to investing, I can see no reason to look any further than this type of investment approach.”
HSBC Global
Strategy
Portfolios
and market views together
Axis analyses the fund
strategy directly from the
from four perspectives to
bring you insight, research
fund manager.
with an explanation of the
“This is a passive strategy for investors looking to have a diversified portfolio investing in global equities and bonds. Whilst it is multi asset the focus is primary bonds and shares, so a fairly straightforward proposition. Charges are kept low which is important in a passive solution, this is achieved by using in house funds where possible. The fact there is a range of solutions for different level of risks for investors will appeal as it means investors can move from one to another as they get older and risk appetite comes down. This range is likely to be of interest to advisers looking for simple solutions for their clients.”
JOB TITLE_ Head of risk-based
solutions research
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“These are cost-efficient portfolios which principally invest in passive investments – and some direct offerings. The funds are structured as unfettered fund of funds but are typically invested in HSBC tracker funds where possible. Each portfolio is structured to offer a level of risk based on what an investor is willing to take. The three funds with a longer-term track record have performed well in what have been strong performing markets, but for these funds it is all about offering risk-adjusted returns rather than beating their peers.”
“The UK equity portfolio is based on the Chris White-managed Premier Income Fund that is currently expected to generate a yield of 4% to 4.5%.”
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Review By Gary Corcoran
COMPANY_ Last Word
Chris White and Geoff Kirk joined forces in October 2017 to co-manage the Premier Optimum Income Fund. As the new fund managers, they have made changes to the way the UK equity portfolio and covered call strategy is managed, introducing an explicit target yield of 7% p.a.
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at Last Word
YEARS IN INDUSTRY_ 25+
JOB TITLE_ Director
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“While the costs in the range are low, the funds do not take shortcuts when it comes to achieving returns.”
Review By Adam Lewis
Designed as a core investment solution, the HSBC Global Strategy range is aimed at investors who want a globally diversified product at very competitive costs.
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YEARS IN INDUSTRY_ 17
JOB TITLE_ Investment Writer
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Designed as a core investment solution, the HSBC Global Strategy range is aimed at investors who want a globally diversified product at very competitive costs.
Review By Adam Lewis at Last Word
Review By Adam Lewis
at Last Word
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Cautious, Balanced, Dynamic
Source: HSBC
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Conservative and Adventurous
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Source: FE Analytics, as at 31 Jan '19
Asset Class Breakdown: HSBC Global Strategy Balanced Portfolio
Asia Pacific equities
North American
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5.2
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Performance vs Peer Group
Source: FE Analytics
Data from xxxx - xxxx
HSBC Global Strategy Cautious
Aug ‘17
12
Feb ‘18
-4
Nov ‘17
Feb ‘19
Nov ‘18
HSBC Global Strategy Balanced
HSBC Global Strategy Adventurous
HSBC Global Strategy Conservative
HSBC Global Strategy Dynamic
IA Volatility Managed
Aug ‘18
May ‘18