HSBC plans Luxembourg RMB bond fund, closes two funds

The bank’s asset-management arm will start a renminbi bond fund targeting European investors in the fourth quarter, and continues its discipline of shuttering unpopular products.
HSBC plans Luxembourg RMB bond fund, closes two funds

HSBC Global Asset Management will add to the dozen funds it launched this year in Asia in the first half of with a Luxembourg-domiciled renminbi bond vehicle targeting European investors.  

The firm is also mulling the idea of launching an RMB money-market fund in North America, but has no concrete plans as yet.

Meanwhile, HSBC Global AM has closed two funds in Asia this year, as they hadn't achieved sufficient scale, although the firm declined to reveal their size. Both were in Taiwan: the HSBC New Japan Fund of Funds and HSBC Europe Star Fund of Funds.

The closures were part of the firm's regular discipline of culling unpopular or underperforming products, says Joanna Munro, who started in May as Asia-Pacific chief executive.

With its planned launches, HSBC hopes to build on the success of the RMB bond fund it launched in March in Hong Kong through private placement and which has raised $500 million. The fund is also available in Singapore and in Japan via a feeder fund structure, and the firm plans to launch it in more markets this year, including Taiwan.

Other firms have already launched RMB fixed-income products targeting European investors, including AllianceBernstein, Allianz Global Investors and BNP Paribas Investment Partners.

The RMB bond fund market is certainly becoming crowded in Hong Kong in the year or so since China relaxed the rules on renminbi accounts, settlement and trading in the territory.

The main problem for asset managers has been finding a sufficient amount of bonds to buy once they have raised money from investors. This is an issue, admits Munro, although she points out that RMB investment opportunities are multiplying, given the growing number of companies issuing in renminbi.

The firm has certainly enjoyed success with other fixed-income products. The Asian high-yield bond fund that HSBC Global AM launched in May – and which raised $500 million in its first month – has now grown to more than $1 billion.

Meanwhile, in terms of targeted institutional markets for its products, the fund manager has prioritised Japan, Australia, China and Korea, says Munro. “These markets are relatively more mature and well-positioned to invest in the specialist capabilities we offer,” she adds. 

With regard to investments, HSBC Global AM’s focus “is clearly on emerging markets, as the world rebalances away from developed markets”, she adds. The firm currently has $140 billion of its AUM in emerging-market assets.

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