Multi-asset capability Connecting a global network of expertise

Transcription

1 Multi-asset capability Connecting a global network of expertise For Professional Clients only

2 Solutions aligned with investors' needs We have over 25 years of experience designing multi-asset solutions to meet our clients long-term financial objectives. Our global expertise and broad client base supports our ability to provide a comprehensive range of diversified portfolio solutions. Our multi-asset proposition Drawdown management Broadly diversified for total return within risk profile and individual client constraints Macro and style factors targeting cash plus returns Risk management and overlay Target Volatility ALM Core multi-asset solutions Specialist multi-asset solutions Risk-focused multi-asset solutions 2

3 Globally connected investment platform USD85.1bn Multi-asset AUM 61 Investment professionals Multi-asset centres of expertise in: Dusseldorf Hong Kong London Paris Vancouver Switzerland Luxembourg Sweden Canada UK Jersey France Germany Austria USA Mexico Bermuda Spain Malta Italy Saudi Arabia Turkey UAE India Japan China 2 Taiwan Hong Kong Singapore Australia Argentina HSBC Global Asset Management offices Our investment focus is truly global, rather than dominated by any single market. We leverage our resources across the world, ensuring cohesiveness and consistency, while empowering experienced local investment teams wherever they are. Breadth of knowledge drives our multi-asset capability As a result of working closely with clients for over 25 years we have an established understanding of how to optimise the balance between investor risk considerations and return objectives, designing solutions that effectively meet the needs of a diverse investor base. Our experience in portfolio construction, combined with our breadth of knowledge across geographies, asset classes and investment styles, underpins our ability to achieve this. Extensive research allows us to fully understand the drivers of risk and return in current markets. We leverage this knowledge to target the most attractive risk premia available, focusing not only on asset classes, but also the underlying factors that drive asset class returns. Our multi-asset investment teams are able to draw on the expertise of internal specialists across the investment spectrum, further deepening our insights into individual markets. All of this is combined with comprehensive portfolio analytics tools built into our global framework, providing a wealth of knowledge for experienced investment teams that are focused on optimising portfolios to meet investors' individual risk/return priorities. Source: HSBC Global Asset Management as at 31 March

4 Expected Risk Premia (%, Nominal, USD) Core beliefs underpinning our investment process A long-term focus Markets are not fully efficient and although anomalies can persist for a while, ultimately there is mean-reversion to fundamentals. This creates opportunities for long-horizon investors. Research-driven An investment philosophy and process should be anchored by independent research. Valuation is key Asset class return distributions are not random they are strongly linked to starting valuations. The price we pay is the principal determinant of asset class attractiveness and riskiness. Dynamic asset allocation As the economic and market regime is inherently uncertain and it is not easy to be dynamic, a structured and disciplined intellectual framework is needed, as well as clear processes to govern the decision-making. Risk awareness Risk is multi-faceted and cannot be captured by just one measure (e.g. volatility). Portfolios need to be exposed to different sources of risk premia and we need to be sufficiently compensated for taking risk, otherwise it should be hedged, diversified, or avoided. Efficient Implementation Efficient and cost-effective portfolio construction is an important consideration. Valuation is key: the risk premia framework Asset class prices are excessively volatile compared with underlying fundamentals, creating opportunities for longhorizon investors focused on fundamentals. Starting with a scenario for cash rates, we build a consistent estimate of asset class valuation for 300+ asset classes, enabling us to understand where relative value exists across markets. Chart shows examples of our estimated asset class risk premia (as at end of June 2018) Japan Equity H EM Equity Local EMD Asia ex Japan Equity Asia Local Bonds Eurozone Equity H Asia HY US Equity Global REITs DM Equity Asia IG Hedge Funds Hard Currency EMD Euro HY Commodities Global Credit US IG Global HY US TIPS US 10y Note US 2y Note Global ABS UK Gilts Private Equity 0.2 Sharpe Ratio Expected Volatility (%) *Global Fixed Income assets are shown hedged to USD. Local EM debt, Equity and Alternative assets are shown unhedged 0.3 Sharpe Ratio 0.1 Sharpe Ratio Source: HSBC Global Asset Management. Any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target. 4

5 Core asset allocation process Reference portfolio Strategic allocation Tactical allocation The reference portfolio is the typical, through-the-cycle portfolio shape The strategic portfolio mix reflecting forward-looking risk and return assumptions Risk-reward of each asset class within the broad strategic groups is assessed Sets the broad allocations for the strategy and the limits around it Can be client determined or calibrated by risk-profiling, and can incorporate additional constraints (income, client liabilities, Solvency II optimisation, etc.) Optimises risk-adjusted returns within the identified limits and constraints The final portfolio shape reflects a more granular portfolio optimisation Shorter term tactical views are incorporated, taking into account position in the market cycle and factors such as momentum We tilt the allocations towards more favourable risk premia Elements of the asset allocation process will differ for specialist solutions Factor exposures or risk management can become the focus of portfolio optimisation, depending on client objectives On-desk risk management tools form part of a disciplined process which is embedded across our portfolio solutions, ensuring appropriate risk is taken at all times Representative overview of the investment process, which may differ by product, client mandate or market conditions. For illustrative purposes only. 5

6 Implementation of the portfolio We aim to achieve the desired beta exposures as efficiently as possible. We evaluate the characteristics of implementation styles to determine the most cost-effective approach without sacrificing the ability for targeted exposures to risk premia. Various dynamics will impact our preference between passive, smart beta or active management strategies within an investment universe, including: Heterogeneity in the universe Concentration levels Factor exposures Level of liquidity Trading costs Experience across investment styles enhances our ability to achieve the desired exposures effectively and efficiently. Our experience in factor-based strategies is an example of this. Importantly, use of internal expertise and resources allows for greater transparency and cost control. For thematic exposures where we don't have an established expertise internally, our global scale enables us to leverage external providers to develop specialised vehicles targeting the relevant risk premia. All aspects of portfolio construction are managed within our singular global framework, including dedicated trading desks. Investment strategy and macro-economic research Asset class experts Portfolio analytics and design Multi-asset portfolio managers With global resources and a full range of expertise we have had an inherent advantage in building a robust global multi-asset framework. This, combined with a rigorous risk management approach, allows us to offer a complete spectrum of solutions across investors' risk considerations. 6

7 Multi-asset is a core competency of HSBC Global Asset Management. Our strategies have diverse risk and return objectives but leverage the same multi-asset investment platform. Our investment processes are structured and disciplined, combining extensive research, experienced portfolio management and comprehensive risk management knowledge. By working closely with our institutional clients over the last 25 years, we have developed our ability to manage tailor-made solutions, taking into account all types of investment constraints and risk limits within our portfolios. Range of solutions: we are solution-oriented Core Aim to maximise risk-adjusted returns while adhering to client constraints. Income Portfolios are optimised to deliver steady income along with capital growth. Specialist techniques (factor investing) Uses a combination of factors to provide long term total return with low correlation to traditional asset classes. Tactical Risk Scaling Framework Customised solutions to meet risk requirements, return targets and floors. Portfolio Insurance Framework Uses dynamic asset allocation and risk overlay to limit volatility and downside risk. Risk Management Objectives vary from asset-liability matching to the management of volatility and drawdowns, as well as optimising to meet regulatory restrictions (e.g. Solvency II). 7

8 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. Counterparty risk: the possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations. Credit risk: a bond or money market security could lose value if the issuer s financial health deteriorates. Default risk: the issuers of certain bonds could become unwilling or unable to make payments on their bonds. Derivatives risk: derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or volatility of their underlying reference(s), instrument or asset. Emerging markets risk: emerging markets are less established, and often more volatile, than developed markets and involve higher risks, particularly market, liquidity and currency risks. Exchange rate risk: changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly. Interest rate risk: when interest rates rise, bond values generally fall. This risk is generally greater the longer the maturity of a bond investment and the higher its credit quality. Investment fund risk: investing in other funds involves certain risks an investor would not face if investing in markets directly. Governance of underlying assets can be the responsibility of third-party managers. Investment leverage risk: investment leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are used. A fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source. Liquidity risk: is the risk that a fund may encounter difficulties meeting its obligations in respect of financial liabilities that are settled by delivering cash or other financial assets, thereby compromising existing or remaining investors. Operational risk: operational risks may subject the fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things. 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. 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 All rights reserved. XB-0759 Exp 31/08/2019 8

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