HSBC Global Investment Funds - Global Short Duration Bond

Transcription

1 HSBC Global Investment s - Global Short Duration Bond SG Share Class 31/05/2018 Objective and Strategy Investment Objective The aims to provide long-term total return (meaning capital growth and income) by investing in a portfolio of bonds. Most of the bonds the invests in have an average duration of between six months and three years. Investment Strategy These bonds are issued/ guaranteed by governments, government agencies and supranational bodies in both developed and emerging markets. The can also invest in bonds issued by companies, non-investment grade and other fixed income securities. The can invest up to 10% in securities issued in emerging markets and up to 10% in securities which have a maturity longer than five years and up to 10% in non-investment grade securities. The can invest up to 10% in asset-backed securities (ABS) and mortgagebacked securities (MBS). The can also invest up to 10% of its assets in contingent convertible securities. The may invest up to 10% of its assets into other funds. The sub-fund is managed to provide a US Dollar return. The 's primary currency exposure is to the US dollar. Up to 20% of its assets, the sub-fund may have exposure to non- US dollar currencies including emerging market currencies. See the Prospectus for a full description of the investment objectives and derivative usage. Since Inception Share Class Details UCITS V Compliant Subscription Mode Distribution Type Dealing Frequency Valuation Time Min. Initial Investment Yes Cash / SRS (Supplementary Retirement Scheme) Daily 17:00 Luxembourg Annual Management Fee YTD Domicile Luxembourg (Net) ISIN Inception Date LU Calendar Year NAV per Share Size USD 22,770, Bloomberg Ticker HGSDACH LX (Net) Ernst Josef Osiander Manager Past performance is not an indicator of future returns. The figures are calculated M Ali Raja in the share class base currency, dividend reinvested. Source: HSBC Global Asset Management, data as at 1 Result is annualised when calculation period Risk Disclosure 1M 3M 1Y 3Y¹ 5Y¹ Since Inception¹ General Investment Risk: The value of investments and any income from them can go down as well as up and you may not get back the amount originally invested. ABS Risk: Asset-backed securities are subject to prepayment risk, liquidity risk, and default risk. Contingent Convertible Security (CoCo) Risk: Under certain circumstances CoCos can be converted into shares of the issuing company, potentially at a discounted price, or the principal amount invested may be lost. Currency Hedged Risk: A sub-fund may engage in foreign currency transactions in order to hedge against currency exchange risk, however there is no guarantee that hedging or protection will be achieved. This strategy may also limit the sub-fund from benefiting from the performance of a sub-fund's securities if the currency in which the securities held by the sub-fund are denominated rises against the Base Currency. In case of a hedged class, (denominated in a currency different from the Base Currency), this risk applies systematically. Derivative Risk: A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. Investing in derivatives involves leverage. High degrees of leverage can magnify the impact of asset price or rate movements. Emerging Market Risk: Emerging markets are subject to greater illiquidity and volatility than developed markets. Exchange Rate Risk: Changes in currency exchange rates will cause the value of investments to fluctuate. Fixed Income Risk: As interest rates rise debt securities will fall in value. All credit instruments have potential for default. Max. Initial Charge Base Currency is over one year. 2 Net of relevant prevailing sales charge 3.00%

2 HSBC Global Investment s - Global Short Duration Bond Share Class 3-Year Risk Measures 5-Year Risk Measures Volatility - Volatility - Sharpe Ratio - Sharpe Ratio - Tracking Error - Tracking Error - Information Ratio - Information Ratio - Characteristics Characteristics Modified Duration to Worst 1.41 Number of Holdings ex Cash 98 Option Adjusted Spread Average Coupon 2.61 Duration (OASD) Option Adjusted Duration Rating Average 5 A+/A (OAD) Maturity Average 1.61 Yield to Worst (Gross) 2.93 Sector Allocation (%) Credit Quality Rating Allocation (%) Treasuries AAA Corp Fin AA 6.33 Corp Non-fin A Supra/agencies 9.78 BBB Cash 4.98 BB 8.42 Sorted from largest to smallest per market values of weight. B 0.89 Cash 4.98 Sorted from highest to lowest rating. Cash is not included in Geographical Allocation (%) any rating. United States Maturity Breakdown (OAD) United Kingdom Germany year 0.22 Japan years 0.84 France years 0.43 Canada years Sweden 2.14 Total 1.38 Belgium 2.14 Sorted from shortest to longest per the length of maturity. Italy 2.00 Currency Allocation (%) USD SEK 1.43 China 1.71 Others Cash 4.98 Only top 10 breakdowns are displayed. Other breakdowns are included in Others. IDR 0.97 Duration Allocation by INR 0.97 Currency Bloc (OAD) GBP 0.04 Dollar 0.78 CAD 0.02 UK Euro 0.18 Others Japan 0.09 Only top 7 breakdowns are displayed. Other breakdowns are EMD Local Currency 0.00 included in Others. Total 1.38 Sorted from largest to smallest per Option Adjusted Duration. 3 OAD, Option Adjusted Duration, excludes interest rate futures, bond futures and excess return from interest rate swaps. 4 OASD, Option Adjusted Spread Duration, excludes interest rate futures, bond futures and excess return from interest rate swaps. 5 Average credit rating uses 'Index rating' which is an average of the vendors: S&P, Fitch, Moody s. The average fund and benchmark rating does not include securities rated NR or NA. Source: HSBC Global Asset Management, data as at

3 HSBC Global Investment s - Global Short Duration Bond Share Class Monthly Performance Commentary Market Overview In May, broadly robust economic data and solid corporate earnings were offset by geopolitical risks emanating in emerging market asset volatility, lingering trade tensions, and rising political uncertainty in Europe. Meanwhile, developed market government bonds gained amid subdued risk appetite. The notable exception was in Europe, with Italian and Spanish bonds selling off sharply amid rising political uncertainty in both countries. Brent crude oil prices rose over the month as US announced that it would pull out of the Iran nuclear deal and amid concerns over falling production in Venezuela. In the US, the Fed left policy rates on hold in May and reiterated their symmetric inflation target, suggesting that they could tolerate a modest inflation overshoot. Importantly, they also perceived the recent strength in healthcare services inflation as transitory. The US administration launched an investigation decided not to extend tariff exemptions on steel and aluminium imports from the EU, Canada and Mexico. Trade negotiations with China continued. General economic data remains broadly strong, with annual retail sales growth remaining on an upward trend. Meanwhile, the latest estimate of Q1 GDP at 2.2% quarter-on-quarter (qoq) annualised is roughly in line with 2017 s growth rate. In Europe, the Eurozone composite PMI fell to 54.1 in the flash estimate for May, below expectations of no change from April s reading of This represents the lowest reading since November 2016, and follows sharp falls earlier in the year. Overall, it appears that there may still be some one-off factors holding back growth, but underlying momentum also looks to have faded. UK core inflation fell to 2.1% in April. Unless service sector inflation bounces back in the coming months, it is possible that UK core inflation drops below 2% over the summer. In this case, the BoE might find it difficult to justify another hike this year. In Asia, China s economic activity remains solid, although amid heightened external uncertainties, policy is likely to turn less restrictive. The government has announced tariff reductions and is likely to stay the course to further open its economy and financial sectors. Overview Contribution from rates positioning was negative as the Italian political crisis caused a rally in core government bond markets and the fund was underweight in duration. The relative value trades in FX were positive as the underweight position in the EUR versus the SEK and the INR paid off. Long IDR against the AUD was neutral on balance. Security selection and asset allocation were the main negative contributors to relative performance as the re-pricing of Italian risk led to a sharp widening of credit spreads. The overweight in financials also detracted as this sector underperformed on a relative basis. The position in US inflation linked bonds (TIPS) also cost slightly as safe haven flows in US-Treasuries led to narrower break-evens. The fund underweight duration was increased via German Bunds with the fund also underweight in the US and Japan. We increased our overweight (in market value terms) in corporates versus underweight in Treasuries, Supranational bonds and Agencies. We increased our exposure to short-dated financials with an average duration of less than 2 years. This was done across banks and insurers. We also added exposure into short-end AT1 with high back-end spreads. Similarly, we added insurers where we saw opportunity to add selective names. In the non-financial space, we added corporate hybrids with a similar concept of high quality issuers which give good carry and have high certainty of call. Selectively added exposure into short-dated emerging market sovereigns and corporates. The fund maintains its underweight position in AAA, AA and A rated bonds, mainly from the underweight in treasuries, and its overweight position in BBB and BB rated bonds from its overweight in corporate bonds. In developed currencies, the fund remains short EUR / long USD position, long SEK / short EUR and short AUD / long USD.,In emerging currencies, the fund remains long INR / short USD and long IDR / short USD based on attractive yield (carry). Outlook US economic activity is expected to remain strong given that the tax reform and solid momentum in the labour market will support consumer spending and private investment. Inflation is likely to move somewhat higher over time from ongoing strong growth and a tight labor market. We expect the Fed to hike rates two more times in 2018, with a risk of three rate increases, whilst balance sheet reduction would run as announced. On balance, we expect US government yields to move further up in 2018 with the magnitude of such move strongly linked to the evolution of inflation and the Fed s stance towards rate increases. We expect economic growth in Eurozone to remain high although momentum has declined recently. The ECB remains cautious but we expect QE to be finished by the end of the year and the monetary policy focus to move towards interest rates. We expect the ECB to start hiking interest rates at a very gradual pace in H Inflation remains subdued with expectations of a gradual increase towards the end of the year as the labor market continues to improve and consumer spending stays on a positive trend. Bond valuations remain rich in Europe and we consider there is potential for higher yields in Japanese government yields are likely to remain low. Although growth has strengthened, core inflation should stay close to zero and the Bank of Japan is expected to continue with its yield curve control policies, which have been very effective so far. Corporate markets have suffered YTD although valuations still look modestly expensive on a risk-adjusted basis. amentals are strong in the US and Euro, although sector and company differentiation is key. US high yield is looking fair value with volatility levels expected to remain higher than in Volatility in Euro investment grade and high yield spreads is likely to rise as we approach the end of ECB QE although continued economic growth and more resilient companies may off-set negative pressures.

4 HSBC Global Investment s - Global Short Duration Bond Share Class Important Information This document 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. This document is for information only and is not an advertisement, investment recommendation, research, or advice. Any views and opinions expressed are subject to change without notice. It does not have regard to the specific investment objectives, financial situation, or needs of any specific person. Investors and potential investors should not invest in the solely based on the information provided in this document and should read the prospectus (including the risk warnings) and the product highlights sheets, which are available upon request at HSBC Global Asset Management (Singapore) Limited ( AMSG ) or our authorised distributors, before investing. You should seek advice from a financial adviser. Investment involves risk. Past performance of the managers and the funds, and any forecasts on the economy, stock or bond market, or economic trends that are targeted by the funds, are not indicative of future performance. The value of the units of the funds and income accruing to them, if any, may fall or rise and investor may not get back the original sum invested. Changes in rates of currency exchange may affect significantly the value of the investment. AMSG has based this document on information obtained from sources it reasonably believes to be reliable. However, AMSG does not warrant, guarantee or represent, expressly or by implication, the accuracy, validity or completeness of such information. HSBC Global Asset Management (Singapore) Limited 21 Collyer Quay #06-01 HSBC Building Singapore Telephone: (65) Facsimile: (65) Website: Company Registration No R Terms of Glossary Convertible bond, is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. Corporate bond, is bond issued by a company in order to raise financing. Coupon, the annual interest rate paid on a bond, expressed as a percentage of the face value. Credit quality, one of the principal criteria for judging the investment quality of a bond or bond mutual fund. Developed markets, countries that are most developed in terms of its economy and capital markets. Duration, a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Emerging markets (EM), nations' economies in the process of fast economic growth. Investments in emerging markets are generally considered to be with higher risk. Government bond or Gilt, a loan to a national government in return for regular payments (known as the coupon) and a promise that the original investment (principal) is paid back at a specified date. Gilts are loans to the UK government. High yield bond, is fixed income security with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default, but have the potential for higher rewards. Information ratio, is a ratio of portfolio returns above/under the returns of a benchmark to the volatility of those returns. Investment grade bond, is considered investment grade or IG if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's. Maturity, the period of time for which a financial instrument remains outstanding. Modified duration to worst, the lowest potential duration that will achieve on a bond without the issuer actually defaulting. Option adjusted duration (OAD), is a duration value based on the probability of early redemption call by the bond issuer. Option adjusted spread duration (OASD), estimates the price sensitivity of a bond to a 100 basis-point movement (either widening or narrowing) in its spread relative to Treasuries, taking into account the likelihood of early redemption. Sharpe ratio, a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. Tracking error, a measure of how closely a portfolio follows the index to which it is benchmarked. Volatility, a measure of how much a fund's price goes up or down as a percentage of its average performance. Yield to maturity, the total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to worst, the lowest potential yield that can be received on a bond without the issuer actually defaulting.

5 HSBC Global Investment s - Global Short Duration Bond Supplement Information Sheet Return Currency YTD 1M 3M 6M 1Y 3Y 1 5Y 1 Since Inception 1 AC USD AC (Net) 2 USD (Net) AC AC (Net) Calendar Year Return Currency AC USD AC (Net) 2 USD (Net) AC AC (Net) Result is annualised when calculation period is over one year. 2 Net of relevant prevailing sales charge Past performance is not an indicator of future returns. The figures are calculated in the share class base currency, dividend reinvested. Share Class Base Currency Distribution Frequency Dividend ex-date Last Paid Dividend Annualised Yield AC USD AC The above table cites the last dividend paid within the last 12 months only. Dividend is not guaranteed and may be paid out of capital, which will result in capital erosion and reduction in net asset value. A positive distribution yield does not imply a positive return. Past payout yields and payments do not represent future payout yields and payments. Historical payments may be comprised of both distributed income and capital. The calculation method of annualised yield: (dividend value / NAV per share or unit as of ex-dividend date) x n, n depends on the distributing frequency. Annually distribution is 1; semi-annually distribution is 2; quarterly distribution is 4; monthly distribution is 12. The annualised dividend yield is calculated based on the dividend distribution on the relevant date with dividend reinvested, and may be higher or lower than the actual annual dividend yield. Share Class Inception Date ISIN Base Currency Min. Initial Investment NAV per Share Annual Management Fee Distribution Type AC AC 27 Feb 2015 LU LU LU USD USD 1, Different classes may have different performances, dividend yields and expense ratios. For hedged classes, the effects of hedging will be reflected in the net asset values of such classes. Expenses arising from hedging transactions may be significant and will be borne by the relevant hedged classes. Hedged class performs the required hedging on a best efforts basis. Source: HSBC Global Asset Management, data as at