HSBC Global Asset Management yesterday launched an Asia Focused Income Fund targeting retail investors, the first product under its so-called managed solutions range.
The fund aims to offer regular and sustainable income to investors in the city by capturing the growth potential of Asia through investing in multiple income-generating assets.
Denis Gould, the fund's manager and CIO in Hong Kong for multi asset and wealth, explains that its portfolio can be adjusted among asset classes, including dividend-paying stocks, bonds (investment grade, high yield, local currency, emerging market and US Treasuries), real estate investment trusts and cash. It has a minimum holding of 70% in Asian income orientated assets.
Asked if he felt HSBC was late to bring this type of product to the market, given that similar funds were introduced over a year ago, Gould says only: "I won't comment on anybody else's product."
He indicates that HSBC started talking about such a product a few months ago and stresses that it is simply meant to address an investor need. As such, he says the timing of the launch is done regardless of other products that might already be available in the market.
"This is the first fund under our managed solutions umbrella," he says. "The investor need is that you get so little interest on cash, and even when you stretch down the curve in terms of high-grade, yields are low. People have lost the ability to have low-risk products and still get some return."
Asked whether the income portion was partly sourced from the product's capital, Gould responds: "No, we are intending to distribute yield on the fund on a monthly basis, whatever it is. We will not maintain a yield through the capital."
He adds that the fund has internal limits on the amount it can allocate to high-risk assets, including equities and high-yield bonds, but declines to disclose these. He notes, too, that the fund utilises asset allocation based on valuation as another means of risk management.
"We found that the best indicator of future returns was valuation, so we want to be invested in risky assets when valuations are attractive, and when they are not we will de-risk the portfolio, and that is over a multi-year horizon," he explains.
Asked how tactical the fund will be, he replies: "If tactical means market anticipation on a three-to-six month basis, that is not what we are doing. What we are doing is evolving that asset allocation based on a valuation cycle. We are just looking to target value wherever it is."
The fund has no targeted country exposure, with Gould indicating that its current model portfolio is exposed to most Asian countries and includes an allocation to global emerging markets. He declines to reveal the bank's fundraising targets, and says its current model has a yield a little over 5%.
The initial public offering period for the Asia Focused Income Fund, with both Hong Kong and US dollar share classes available, is from May 2 to May 25. The minimum investment amount is $1,000, or HK$10,000, meaning it is largely targeting mass affluent and above.