HSBC Global Funds ICAV – Index Fund Series
- HSBC Global Funds ICAV - US Equity Index Fund invests in equity securities which are constituents of S&P 500 Net Total Return Index (“the Index”). The Fund may also invest in an equity security in advance of the equity security becoming an Index constituent. The securities in which the Fund invests will be listed or traded on Recognised Markets in the US. The Fund will adopt a full replication strategy by aiming to hold all of the stocks included in the Index in the same proportions in which they are included in the Index. The Fund is subject to the concentration risks of investing in a single market and/or substantial investments in securities issued by a single issuer.
- HSBC Global Funds ICAV - Global Equity Index Fund invests mainly in equity securities which are constituents of MSCI World Net Total Return Index (“the Index”) and equity security in advance of the equity security becoming an Index constituent. If the overall portfolio matches the characteristics of the Index, the Fund may also invest in non-Index constituents.
- HSBC Global Funds ICAV - Global Aggregate Bond Index Fund invests mainly in constituents of Bloomberg Barclays Global Aggregate Bond Index (total return hedged to USD): bonds, Asset Backed Securities (“ABS”), Mortgage Backed Securities (“MBS”), Commercial Mortgage Backed Securities (“CMBS”) and Covered Bonds all of which may be callable.
- HSBC Global Funds ICAV - Global Corporate Bond Index Fund invests mainly in corporate bonds, ABS and MBS all of which are constituents of Bloomberg Barclays Global Aggregate Corporate Bond Index (total return hedged to USD) and may be callable.
- HSBC Global Funds ICAV - Global Emerging Market Government Bond Index Fund invests fixed income securities which are constituents in JP Morgan EMBI Global Diversified Index (total return) (the “Index”), certain securities in the portfolio are not Index constituent securities is permitted. The Fund is subject to the risks of investing in emerging markets.
- HSBC Global Funds ICAV - China Government Local Bond Index Fund invests fixed income securities which are constituents in Bloomberg Barclays China Treasury and Policy Bank 9% Capped Bond Index (total return) (the “Index”), certain securities in the portfolio are not Index constituent securities is permitted. The Fund is subject to the risks of investing in emerging markets, and may involve substantial index concentration risk, new index risk, risks associated with CIBM and Bond Connect, mainland China tax and currency risks, mainland china market risks.
- For HSBC Global Funds ICAV - Global Aggregate Bond Index Fund and Global Corporate Bond Index Fund, if the overall portfolio matches the characteristics of the Indexes, the Funds may also invest in non-Index constituents, included non-Investment grade bonds which may be callable. ABS, MBS, CMBS, unrated bonds, and non-investment grade bonds which are callable bonds may subject to additional risks and volatility. The Funds are also subject to the risks of investing in emerging markets.
- The above Funds are passively managed index funds. Unlike “actively managed” unit trusts and mutual funds, the manager will not have the discretion to adapt to market changes due to the inherent investment nature of the Funds. A fall in their tracking indexes (“the Indexes”) will result in a similar fall in the net asset value of the Funds.
- Changes in the net asset value of the above Funds are unlikely to exactly replicate changes in the Indexes. The Funds’ returns may therefore deviate from those of the Indexes (known as “tracking error”) due to practical limitations as well as fees and expenses, amongst other reasons. Whilst the Funds will seek to minimize tracking error, there is no guarantee or assurance of exact replication of the Indexes.
- Because the above Funds’ base currency, investments and classes may be denominated in different currencies, investors may be affected adversely by exchange controls and exchange rate fluctuations.
- The above Funds may invest in financial derivative instruments for investment purpose which may lead to higher volatility to its net asset value.
- The above Funds’ investments may involve substantial credit, currency, volatility, liquidity, tax, interest rate, sovereign and political risks. Investors may suffer substantial loss of their investments in the Funds.
- Unit trusts are NOT equivalent to time deposits. Investors should not invest in the above Funds solely based on the information provided in this document and should read the offering documents of the Funds for details.
HSBC Global Funds ICAV
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Why index funds?
Two-minute videos on index funds
Why these markets now?
Why Global Equities now?
Global equities provide relatively attractive potential returns
Modest global growth and limited wage inflation should mean that we can expect mid-single digit earnings growth in 2020. Therefore, global equities can still potentially provide relatively attractive returns.
Monetary easing and fiscal policies from around the world work to boost global economy
At present a lot of countries prefer expansionary fiscal policies, which help buoy the economy and alleviate recession risks. Additionally, expansionary fiscal policies are also adopted to promote economic development
A lot of countries leaning towards expansionary fiscal policies
Source: HSBC Global Asset Management, Macrobond, September 2019
Why US Equities now?
The US economy is growing faster than other regions
With a strong labour market, domestic consumption continues to grow, which gives impetus to the US economy to outperform other markets
US equities are likely to record full-year earnings growth
Corporate earnings growth is expected to slow in 2019 but companies are likely to log double-digit growth for their bottom lines in 2020. This is nothing like the 40% decline in 2008.
Earnings growth for US equities is still in positive territory
Source: Factset, October 2019
Why Global Aggregate Bonds now?
Including mortgage-backed securities (MBS) for better risk diversification
MBSs are mainly issued or guaranteed by government bodies, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). They have low correlations with equities and corporate debts, as well as lower long-term volatility. That helps diversify risks and sources of income for one’s investment portfolio.
Room for global debt yields to trend downward
Many countries have adopted expansionary policies to cope with economic uncertainties, which helps support the bond market. Against multiple interest rate cuts in the US and the new asset-purchase program under the European Central Bank, inflows into the bond market are expected to surge and further depress bond yields.
10-year government bond yields in major economies
Source: Bloomberg, as of 30 September 2019
Why Global Corporate Bonds now?
Corporate debts are relatively attractive as more and more government bonds carry negative yields
The total outstanding of negative-yielding bonds around the globe has hit USD17 trillion*, of which 85 per cent are issued by government bodies and mainly concentrated in Europe. The dynamics is driving inflows into corporate bonds for potentially higher return.
*Source: Bloomberg, August 2019
Improved solvency among BBB-rated and investment-grade issuers
The market for US BBB-graded bonds has expanded in recent years, thanks to extensive re-rating activities. Generally, the repayment ability of investment- grade issuers rated BBB or above has also improved.
The debt-to-EBIDTA (earnings before interest, taxes, depreciation, and amortization) ratio among US investment-grade companies
Source: S&P Global, as of end December 2018
Why Global Emerging Market Government Bonds now?
Emerging market sovereign bonds in short supply
Issuances of hard currency emerging market sovereign debts are expected to halve this year*. The scarce supply will support the prices of the asset class.
*Source: HSBC Global Asset Management, Bloomberg, August 2019
Marked inflows into emerging market bonds
Strong inflows into emerging market bonds support prices of the asset class, especially for those denominated in the US dollar.
Inflows into emerging market assets
Source: Institute of International Finance, as of 31 July 2019
Why China Government Local Bonds now?
Chinese bonds are becoming mainstream
With onshore debts issued by the government and policy banks being included into the Bloomberg Barclays Global Aggregate Bond Index, Chinese bonds will become the fourth largest component in the benchmark, and will increasingly become a mainstream asset class.
RMB bonds provide attractive potential return
The onshore RMB-denominated Chinese government bonds offer better yields than issuances in other major markets
China’s 10-year government bond yields outperform other major markets
Source: Bloomberg, 2 September 2019
This page is prepared for general information purposes only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive it. This page does not constitute an offering document and should not be construed as a recommendation, an offer to sell or the solicitation of an offer to purchase or subscribe to any investment.