HSBC Global Asset Management has launched the HSBC Investment Grade Bond Fund 2013 for investors looking to capture stable returns amid the uncertainty caused by the global market turmoil.
The fund will invest in a globally diversified portfolio of around 30 to 40 US dollar-denominated investment grade bonds. It aims to deliver coupons on a semi-annual basis throughout its four-year investment tenure. As its name shows, the fund matures in April 2013.
"Under global economic uncertainty, investors are seeking opportunities in quality and less risky asset classes managed in a transparent manner," says Bonnie Lam, director and head of wholesale business at HSBC Global Asset Management in Hong Kong.
The fund will be managed by a fixed-income team in Asia-Pacific led by Cecilia Chan, director and head of fixed income at Halbis, the active fundamental investment specialist of HSBC Global Asset Management. The team, which managed more than $14 billion of fixed-income assets as of end-December, has an average of over 13 years of industry experience and a track record of consistent performance. The entire portfolio holdings of the actively managed fund will be disclosed regularly, to provide investors with the added comfort of knowing what they are investing in, says Lam.
Investment-grade bonds have underperformed US Treasuries significantly since August 2007 with the credit spread widening to historically wide levels indicating that the valuations of investment-grade bonds are at very attractive levels, according to HSBC Global Asset Management. And unlike non-investment grade or high-yield bonds, investment-grade bonds have much lower credit default probability, and are likely to deliver more stable future returns, the fund house adds.
"Since the onset of the global credit crisis, financial assets have been tremendously re-priced," says Chan. "The significant widening of credit spreads or yield premiums to historical levels indicates the attractive valuations of selected investment-grade bonds in the global market, and offers appealing investment opportunities to investors taking a buy and hold approach."
While the fund aims to generate stable returns over the next four years, it is also exposed to certain risks, including: fluctuation in interest rate movements; an issuer suffering an adverse change in its financial condition; an issuer's failure to pay interest or repay the principal; lack of liquidity; risks specific to emerging markets; plus the fact that the coupon payment is not guaranteed.
The fund's expected minimum credit ratings are BBB- or Baa3 and its expected average credit ratings are A- or A3. The fund's minimum investment amount is $1,000. It has an initial sales charge of 3%, an annual management fee of 0.75%, and a redemption fee of 1%.