HSBC is looking to expand its range of multi-asset managed solutions by launching fresh retail products with different risk profiles, potentially in the new year.
The thinking is that investors have become heavily fixated on fixed income and high-yield, but that with money chasing bonds and spreads tightening as a result, equities look more like producing a reasonable real return.
The bank will seek to adjust weightings in its multi-asset portfolio, to provide more choice within its different risk bands (band 1 being least risky, band 5 most risky).
It comes as the bank moves to introduce its Asia Focused Income fund (band 3, Ucits compliant) to retail investors in Singapore today. It launched the product – currently the sole fund under its managed solutions range – in Hong Kong this May and so far it has raised $987 million in AUM.
The feeling is that the strategy can comfortably accommodate $2 billion. But at the same time Denis Gould, the fund’s manager and CIO in Hong Kong for multi-asset and wealth, expresses surprise at the level of turnover that the Asia Focused Income fund has seen.
“Cashflows are still positive now, although it’s not as fast as it was,” he notes. “What has been a little surprising for me, never having launched a retail fund before, is the level of turnover. You see a lot of gross sales and quite a number of redemptions on a regular basis.”
He suspects this is because the unit price of the fund has done well since launch, making it tempting for investors to take profits.
But he adds: “This is not intended to be a buy-and-sell fund, it is intended to be a solution to the need to get better yield on your cash. I do not think it is a wise strategy to try and flip in and out.”
He voices the view that investors are underinvested in equities from an asset-allocation point of view. While he does not believe they are screamingly cheap, he does believe they will produce a reasonable real return over the long term.
“From that point of view we think investors should be thinking more about equities now, that they should be the cornerstone of a return-seeking portfolio,” he says. “People need to think more about equities just as a way to improve their total return because it is a low-return world.”
Gould works with a team of five fund managers and two strategists based in Hong Kong. They are plugged into the bank’s global network of multi-asset and wealth managers, with Paris its multi-asset research centre.
Asked whether HSBC had plans to sell its band 3 Asia Focused Income fund in other markets in Asia and elsewhere, Gould confirms that the fund is not being actively marketed in Europe right now, but adds: “We will monitor any market and there is no reason why it can’t go anywhere.”
At present HSBC's Asia Focused Income fund is 28.7% invested in Asian investment grade bonds, 21.4% in Asian high-dividend equity, 17.8% in Asian high-yield bonds, 14% in Asian local-currency bonds, 9.7% in GEM bonds and 8.4% in cash and US/HK/SG government bonds.
It has paid out an annualised yield of 4.7% since July. The fund's subscription fee is up to 5.25% and management fee 1.25% per annum.