Exchange Traded Funds (ETFs) Our Solutions

Transcription

1 Exchange Traded Funds (ETFs) Our Solutions For Professional Clients only The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you may not receive back the amount originally invested.

2 Our overall AUM (end of June 2018) USD6.7bn Our ETFs Our range of 27 ETFs enables our clients to access developed and emerging equity markets at global, regional and country levels. We are recognised as experts in emerging markets, underpinned by our footprint, our local market knowledge and access through out global network. This has allowed us to develop a successful broad emerging market ETF range to sit along side our developed market products. This combined offering allows investors to access global equity markets and manage global investment portfolios. HSBC active systematic ETFs Transparent Cost efficient In October 2017, we launched our first active systematic strategies. These ETFs will take advantage of our long track record in smart beta and fundamentally weighted strategies, a well resourced research team of 20 investment professionals, supported by technology infrastructure and experienced ETF portfolio managers. Both ETFs offer diversification from passive and active strategies, and cost efficient access to smart beta solutions. Tracking HSBC Multi Factor Worldwide Equity UCITS ETF: The strategy uses a proprietary multi factor investment model which aims to provide consistent outperformance against a market capitalisation weighted index over the medium to long term through exposures to a suite of diversified factor-based risk premia. HSBC Economic Scale Worldwide Equity UCITS ETF: The strategy uses a systematic investment approach and invests in companies according to their economic scale. The chosen measure for economic scale is a company s contribution to Gross National Product, often referred to as value added. Cost efficiency in practice At the heart of our investment process is delivering close tracking error and managing tracking error budgets, while minimising the funds execution costs. We have a proven track record in providing competitively priced market access solutions; supported by our dedicated portfolio management teams, our investment in the latest trading technology and a dedicated global equity dealing team. Euro Stoxx 50 Source: Bloomberg, HSBC Global Asset Management as at end of June Market average has been computed by looking at the TER of the main Europe-domiciled ETFs tracking the same benchmark. TER / OCF (%) Market average 1 HSBC Euro Stoxx 50 UCITS ETF MSCI Japan HSBC MSCI Japan UCITS ETF S&P 500 HSBC S&P 500 UCITS ETF MSCI World HSBC MSCI World UCITS ETF MSCI Emerging Markets HSBC MSCI Emerging Markets UCITS ETF

3 USDbn ETF/ETP assets by region listed 2,130 2,405 3, Canada USA Europe Japan Asia ex Japan 170 Benefits of HSBC ETFs Diversification Benefits of broad exposure within an asset class or category. Transparency The basket of underlying securities ( PCF ) is published every day. USD650bn YTD December net inflows globally Cost effective Relatively low costs and transparent annual management fees. Liquidity ETF liquidity comes from the underlying securities and is enhanced by secondary markets. ETF AUM growth % Precision Accurate tracking Controlled risk No minimum investment Target exposure to asset classes, investment style or sector. Robust quantitative portfolio management, trading and risk monitoring ensure efficiency. minimizes risk. ETFs can be bought and sold in 1 share. Source: ETFGI as at end of December

4 Partnership in index and systematic equity We have successfully managed index funds for external clients since 1988, with dedicated portfolio management teams across global markets, leveraging our infrastructure and expertise. We currently manage USD43 billion 1 in passive and systematic strategies. Our ETF solutions are built on our strong index tracking heritage, integrated platform and disciplined process. We take a pragmatic approach to managing ETFs with two equally important objectives: close tracking and minimising costs. We offer equity market exposure to a range of global markets. We carefully select indices where we can manage trading costs and liquidity. Our tracking method and value-added approach to managing passive funds have enabled us to consistently produce returns that closely mirror the index within target tracking tolerances. Through considered implementation, we aim to find the optimal trade-off between temporary tracking error and transaction costs, when trading at large rebalance points, such as an index reconstitution or a portfolio model review. The optimal balance and duration of implementation is important in achieving this objective and ultimately improves portfolio performance over time. Our research has shown this approach adds, net of transaction costs, to the performance of passive portfolios and is driven as a function of the size of the opportunity set available, i.e. frequency of rebalances and number of index changes. The diversification of implementation is based on the detailed analysis of trade characteristics such as liquidity, demand and supply profiles, volume multiple indicators, price movements over short periods, expected market impact, and portfolio risk. HSBC added value Evolve strategy Added Value Continuous review Execution Execution Pre-trade analysis Trading strategy Investment team review 30+ years experience managing passive and systematic equity portfolios The strength of HSBC s capabilities ESG and munitions stock screening Strong relationship with the administrator Competitive execution costs Dedicated global equity dealing team 1. As at end of June Source: HSBC Global Asset Management. For illustrative purposes only. 4

5 Strong index tracking heritage Replication Large investments in the latest trading technology Dedicated passive portfolio management team across all types of index solutions High tracking accuracy INDEX & ACTIVE SYSTEMATIC Strategies Launched our first UK index fund American Index Fund FTSE All Share Index Fund, HSBC European Index Fund, and, HSBC Japan Index Fund 1994 HSBC FTSE 100 Index Fund 1997/1998 HSBC FTSE 250 Index Fund, and HSBC Pacific Index Fund 1st Multi Factor Institutional mandate Global Equities (MSCI ACWI based) strategy launched UK Mutual funds launched US, UK and Japan country funds Listed our first ETFs on the LSE. Launched 24 ETFs across developed and emerging markets cross listed our ETFs across France, Germany and Switzerland Launch of our Fundamentally Weighted Strategies: Economic Scale Equity Launch of UCITS Common Contractual Funds, based on our Economic Scale Equity Strategies offering tax efficient, transparent cross border pooling Launch Multi Factor strategies- Income, HGIF Global Lower Carbon Equity Launched two new Active ETFs following our proprietary Active Systematic strategies Years experience in index and quantitative equity management Launch of proprietary quantitative tools Establishment of Systematic Research team within HSBC Global Asset Management. Developing our active systematic model portfolios and building research and insights leveraged by our equity portfolio managers Development of our industry leading Visuliser platform, a proprietary portfolio modelling, construction and risk analytics system integrated across our global network Launch of HSBC s proprietary portfolio and stock investment decision tool TRAC supporting our passive investment process to deliver improved and scalable execution Roll out and further integration of PECMan, the proprietary Cash Management Investment Decision Tool - supporting our passive investment process Updates to our risk modelling creation of proprietary tools and resources Use of trade optimisation techniques that improve risk / adjusted returns focusing on the equity market trading micro structure, with access to data and technology to enhance the process and fund risk adjusted returns Core research team Strategy, portfolio construction and research Portfolio modeling / construction Portfolio / stock management Cash management Risk modelling Trading / implementation Developing proprietary technology Enhancements to our process Launch of our new ICAV platform in Ireland to promote our passive funds cross border Proprietary projection of index changes by the HSBC Index Funds Team Index projections 5

6 Our ETF investment process Index activity / Rebalances Rebalance / review Timing and announcement Frequency and overlap Client requirements Objectives Constraints Universe Market segment Strategy Analysis Impact Estimated cost / risk Portfolio construction approach Size of assets Breadth of benchmark Liquidity profile of stocks Custody and admin costs Index rebalance frequency Benchmark / Market events monitoring Corporate actions Strategy weights Free float and share in issue changes Dividend management Share offerings Rights issues Trade execution Market access route Method of execution electronic Reporting Risk trading Risk management Source: HSBC Global Asset Management. For illustrative purposes only. 6

7 Investing in proprietary technology At HSBC Global Asset Management we have heavily invested in leading investment technology to support our investment process and seize opportunities for our clients as they emerge. Our leading proprietary technology ensures the efficiency and accuracy of information- supporting consistent tracking and fund performance. At HSBC our technological developments are integrated into our investment platform, providing: Trade modelling Exposure Management module In-house proprietary algorithms and optimisation techniques, Direct feeds of large pools of data, Risk management coded and embedded across the platform at both pre- and post-trade. Algorithmic trades Risk Management and reporting Passive investment process Fund / Benchmark module This is ever evident in the regards to managing our ETF range; where the technology compliments the ability of our investment team to bring cost savings and better performance outcomes for funds and clients. Order Management integration Access, roles and privileges and optimisation Our ETFs benefit from our physical approach- where our portfolios are invested in the constituents of the underlying index, and do not use synthetic instruments, such as swaps sand other derivatives, to mirror index performance. Some studies have shown that synthetic funds can offer a lower tracking error over time than physically replicated funds. However, the risks associated with synthetic index-based funds, most importantly counterparty risk, are often regarded as a less attractive investment option. In cases where buying all the underlying securities is not cost-effective, physical funds can use an optimised method of portfolio construction and trade generation. The optimisation method, purchases a representative proportion of securities in the underlying index, which is highly correlated to owning the entire index. Optimisation offers lower costs especially in regards to broad indices composing a very large number of stocks such as the MSCI Emerging Markets. Closely Tracked, Minimised Execution Costs Controversial weapons screening: benefit of doing the right thing In 2010 HSBC Global Asset Management implemented a screening of controversial weapons such as anti-personnel mines, cluster munitions, biological and chemical weapons, and depleted uranium across the active business to exclude investments in issuers that are involved in these weapons. We subsequently expanded this screening to optimised index funds, and then later to our entire passive ranges including our suite of ETFs. The Convention on Cluster Munitions (CCM) took effect in August Several countries adopted legislation on cluster munition, but the laws around passive funds investing are not clear cut. We believe there are several reasons why the decision to expand the screening across all our equity investments is the right one: We aim to comply with the spirit and the letter of the law The screening currently has a minor performance/tracking impact. We believe that as the focus on this subject increases, companies still involved might choose to cease their involvement, reducing the need for screening 7

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9 How to invest in HSBC ETFs Authorised participants 1 HSBC ETFs can be bought through a regulated stock exchange. They are easy to use, a low cost investment option and are widely available on most online brokerage accounts and through financial advisers. HSBC ETFs are supported by a large network of authorised participants. The following list of institutions are authorised to create and redeem shares in the ETF range: Stockbroker Goldenberg Hehmeyer HSBC Global Markets You can buy HSBC ETFs during daily trading hours using a stockbroker. If you do not have a stockbroker already then the exchange can help you locate a stockbroker. Please note that other fees may apply. HSBC ETFs are listed throughout Europe: IMC Trading Susquehanna Optiver BAML London Stock Exchange Flow Traders Virtu Deutsche Boerse Euronext Paris Jane Street Morgan Stanley Six Switzerland Borsa Italiana Societe Generale Commerzbank Execution platforms HSBC ETFs can be purchased via a wide range of execution platforms some of which are listed below: RBC Official Market Makers Authorised Participants Aegon AJ Bell Alliance Trust Savings Ascentric Aviva Wrap Elevate Fidelity Funds Network James Hay Novia Nucleus Raymond James Standard Life Transact Zurich Why HSBC as an ideal ETF partner? Focused product offering Robust investment process Track record and performance Competitive pricing Transparent Liquidity and accessibility Core index capabilities covering a large variety of markets 1. In depth analysis of portfolio universe 2. Robust technology and support infrastructure 3. Rigorous risk monitoring A strong history of low tracking error drawn from our deep experience in index based investing The ability to offer competitive TER/OCF across our ETFs 1. Fully transparent with physical, no securities lending 2. All constituents online 1. Quoted continuously throughout the day on European exchanges 2. Market making commitments for all products 1. The contact details of our authorised participants are available on our dedicated ETF website- Source: HSBC Global Asset Management. For illustrative purposes only. 9

10 HSBC ETF range Fund name ISIN Base currency TER / OCF AUM (USD) Dividend frequency Replication method Developed markets regional exposure HSBC MSCI WORLD UCITS ETF IE00B4X9L533 DE000A1C9KL8 USD 0.15% 566,734,644 Quarterly Optimisation HSBC MSCI EUROPE UCITS ETF IE00B5BD5K76 DE000A1C22L5 EUR 0.20% 185,260,924 Semi-annual HSBC EURO STOXX 50 UCITS ETF IE00B4K6B022 DE000A1C0BB7 EUR 0.05% 147,449,230 Semi-annual HSBC MSCI PACIFIC ex JAPAN UCITS ETF IE00B5SG8Z57 DE000A1C22P6 USD 0.40% 36,157,024 Semi-annual Developed markets single country exposure HSBC S&P 500 UCITS ETF IE00B5KQNG97 DE000A1C22M3 USD 0.09% 3,049,015,329 Semi-annual HSBC MSCI USA UCITS ETF IE00B5WFQ436 DE000A1C22K7 USD 0.30% 75,698,658 Semi-annual HSBC FTSE 100 UCITS ETF IE00B42TW061 DE000A1C0BC5 GBP 0.07% 214,436,415 Semi-annual HSBC FTSE 250 UCITS ETF IE00B64PTF05 GBP 0.35% 55,027,702 Quarterly HSBC MSCI JAPAN UCITS ETF IE00B5VX7566 DE000A1C0BD3 USD 0.19% 234,854,804 Semi-annual HSBC MSCI CANADA UCITS ETF IE00B51B7Z02 DE000A1JF7N6 USD 0.35% 33,791,524 Semi-annual Developed markets property exposure HSBC FTSE EPRA/NAREIT DEVELOPED UCITS ETF IE00B5L01S80 DE000A1JXC78 USD 0.40% 146,739,585 Quarterly Global markets broad exposure HSBC ECONOMIC SCALE WORLDWIDE EQUITY UCITS ETF IE00BKZG9Y92 DE000A2JG4F7 USD 0.25% 420,249,255 Quarterly N/A (active) HSBC MULTI FACTOR WORLDWIDE EQUITY UCITS ETF IE00BKZGB098 DE000A2JG4G5 USD 0.25% 249,201,811 Quarterly N/A (active) Source: HSBC Global Asset Management, as at end of June

11 HSBC ETF range Fund name ISIN Base currency TER / OCF AUM (USD) Dividend frequency Replication method Emerging markets regional exposure HSBC MSCI AC FAR EAST EX JAPAN UCITS ETF IE00BBQ2W338 DE000A1W2EK4 USD 0.60% 287,798,451 - Optimisation HSBC MSCI EM FAR EAST UCITS ETF IE00B5LP3W10 DE000A1C22Q4 USD 0.60% 37,086,531 Semi-annual Optimisation HSBC MSCI EM LATIN AMERICA UCITS ETF IE00B4TS3815 DE000A1JF7T3 USD 0.60% 14,890,688 Quarterly HSBC MSCI EMERGING MARKETS UCITS ETF IE00B5SSQT16 DE000A1JXC94 USD 0.40% 264,465,424 Quarterly Optimisation Emerging markets single country exposure HSBC MSCI BRAZIL UCITS ETF IE00B5W34K94 DE000A1C22N1 USD 0.60% 28,140,562 Semi-annual HSBC MSCI TAIWAN UCITS ETF IE00B3S1J086 DE000A1JF7R7 USD 0.60% 11,143,087 Semi-annual HSBC MSCI INDONESIA UCITS ETF IE00B46G8275 DE000A1JF7Q9 USD 0.60% 45,228,777 Semi-annual HSBC MSCI KOREA UCITS ETF IE00B3Z0X395 DE000A1JXC60 USD 0.60% 10,629,552 Semi-annual HSBC MSCI MALAYSIA UCITS ETF IE00B3X3R831 DE000A1JF7S5 USD 0.60% 4,809,838 Semi-annual HSBC MSCI CHINA UCITS ETF 1 IE00B44T3H88 DE000A1JF7L0 USD 0.60% 367,692,189 Semi-annual HSBC MSCI CHINA A INCLUSION UCITS ETF 2 IE00BF4NQ904 USD 0.60% ~10,000,000 Quarterly HSBC MSCI MEXICO CAPPED UCITS ETF IE00B3QMYK80 DE000A1JF7P1 USD 0.60% 10,796,171 Semi-annual HSBC MSCI SOUTH AFRICA CAPPED UCITS ETF 2 IE00B57S5Q22 DE000A1JF7M8 USD 0.60% 3,800,469 Semi-annual HSBC MSCI TURKEY UCITS ETF IE00B5BRQB73 DE000A1H49V6 USD 0.60% 5,563,625 Semi-annual HSBC MSCI RUSSIA CAPPED UCITS ETF IE00B5LJZQ16 DE000A1JXC86 USD 0.60% 179,010,993 Semi-annual 1. As at 27 th July 2018 (launch date). 2. As at 24 th April previously HSBC MSCI South Africa UCITS ETF. Source: HSBC Global Asset Management, as at end of June

12 Contact For more information, please contact us: Telephone: Website: Key risks The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you may not receive back the amount originally invested. Exchange Rate risk: Investing in assets denominated in a currency other than that of the investor s own currency perspective exposes the value of the investment to exchange rate fluctuations. Derivative risk: The value of derivative contracts is dependent upon the performance of an underlying asset. A small movement in the value of the underlying can cause a large movement in the value of the derivative. Unlike exchange traded derivatives, over-the-counter (OTC) derivatives have credit risk associated with the counterparty or institution facilitating the trade. Index Tracking risk: The performance of the Fund may not match the performance of the index it tracks because of fees and expenses, market opening times and regulatory constraints. Operational risk: The main risks are related to systems and process failures. Investment processes are overseen by independent risk functions which are subject to independent audit and supervised by regulators. Liquidity risk: Liquidity is a measure of how easily an investment can be converted to cash without a loss of capital and/or income in the process. The value of assets may be significantly impacted by liquidity risk during adverse market conditions. Emerging Market risk: Emerging economies typically exhibit higher levels of investment risk. Markets are not always well regulated or efficient and investments can be affected by reduced liquidity. Focused Strategy risk: Funds with a narrow or concentrated investment strategy may experience higher risk and return volatility and lower liquidity than funds with amore diversified approach. Important information For Professional Clients only and should not be distributed to or relied upon by Retail Clients. The material contained herein is for information only and does not constitute legal, tax or investment advice or a recommendation to any reader of this material to buy or sell investments. You must not, therefore, rely on the content of this document when making any investment decisions. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe to any investment. Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target. HSBC ETFs are sub-funds of HSBC ETFs plc ( the Company ), an investment company with variable capital and segregated liability between sub-funds, incorporated in Ireland as a public limited company, and is 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. 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. 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. 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 and Fund supplement (where available) and additionally, in the case of retail clients, the information contained in the supporting SID. 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. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Stock market investments should be viewed as a medium to long term investment and should be held for at least five years. 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. 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 2018 All rights reserved. 18-XB-0619 EXP: 30/11/