Fund Selector Series: 'Growing interest in EMs like India'

Lina Lim is HSBC Global Private Banking and Wealth’s regional and Hong Kong head of discretionary and funds.

She oversees long-only funds selection and discretionary portfolios in Asia.

She joined HSBC Private Bank's investment services and product solutions team in Asia Pacific in 2019, after more than a decade at JP Morgan in various roles.

Lim manages teams in Hong Kong and Singapore as well as an onshore China team that does due diligence.

She also works closely with a global manager selection team in London and there is a local approval oversight team that ensures the team meets local regulatory requirements.

Lim is a strong advocate of sustainability and has seen investor attitudes evolve over the past few years.

"There has been some skepticism on ESG investing, in terms of how E, S and G considerations may affect performance," she told AsianInvestor.

 "These types of questions are healthy. It is our view that ESG considerations are accretive to performance and to effectively integrate ESG factors into risk management and investment decision."

The interview has been edited for clarity and brevity.

Could you provide some details about your fund platform?

With the [HSBC] Group’s ambition to be the leading wealth manager in Asia, we continue to invest and expand our products and capabilities in the region as one of the leading funds distributors.

We have an open architecture. We work and engage predominantly with most global asset managers as well as our in-house team, HSBC Asset Management. 

In terms of active funds, we have about 150 to 200 funds on the platform.

How does the fund selection process work?

Our fund selection process is based on our CIO view. We screen our funds to determine those that are most relevant to our clients, based on the house view. Those that make it through this process are placed on our approved advisory list.

We are agile about adding and removing funds from our approved list. We conduct periodic reviews of the financial performance of funds as well as the team that manages them, factoring in any recent relevant news or changes to team structure. This is done regularly as part of our ongoing governance process.

We constantly review our platform to assess if there is any strategy gap, for instance, if we are optimistic on certain areas of investment, we ensure that we have the right funds that can help clients.

When we find a gap and identify a need, we also actively engage our global partners to bring those to our clients. We have an approved list of global managers we work with.

Due to the scalability of our business, we are increasingly working with key partners to develop strategies that support the investment needs of the full spectrum of our wealth clients.

We also work with fund houses to bring exclusive strategies that are only available to HSBC clients, in specific markets and even at a global level.

How do you separate the good from the bad?

I don’t classify funds as ‘good’ or ‘bad’.

What I am looking for is whether the strategies we offer are in line with our objectives and guidelines – and of course, the needs of our clients. 

We place a great emphasis on team structure – we conduct a lot of operational due diligence on top of making investment decisions.

We consider various factors during our assessment of funds.

First we look at the philosophy, and the team’s organisation. Some fund managers are built around a star manager structure and some are built around a team.

We look at turnover of staff, and how the investment process is designed and how investment decisions are actually made.

And of course, we track the investment performance record to see if there are any potential red flags we need to investigate further.

We take a comprehensive approach when evaluating funds.

We monitor things like any breach of the investing guidelines, in terms of holdings – that can be a red flag. Will some recent news affect the portfolio managers or the team – that is also something we will consider.

Have you seen any emerging trends in sustainability-related investments?

Asian clients are definitely keen to learn about sustainable investments – that has been a trend in the past few years.

They are definitely more engaged, and from our perspective, we are also doing a lot more education and training, for clients and internal colleagues so they stay on top of sustainability trends.

They increasingly want to know how they can incorporate environmental, social and governance (ESG) in their portfolios and strategies.

There has been some skepticism on ESG investing, in terms of how E, S and G considerations may affect performance. 

These types of questions are healthy. It is our view that ESG considerations are accretive to performance and to effectively integrate ESG factors into risk management and investment decision.

What client trends do you see over the next 12 months?

Our view is that rate hikes are likely to have gone as far as they can. Our CIO expects the first Federal Reserve rate cut in Q3 2024 and the first rate cut by the European Central Bank in December 2024.

With declining cash yields on deposits, we are seeing clients extending duration in cash or fixed income strategies.

There is a lot of interest in income strategies. These could be pure fixed income or multi-asset income strategies.

We are also seeing interest in emerging markets, especially in India. India is a market that lots of investors are looking at. Our CIO is optimistic on India as the market is with positive cyclical momentum and structural growth stories. 

Japan was more prominent in the previous year, generating favourable returns for our chosen funds. Now, other markets like South Korea and Indonesia are also of interest based on valuations.

In the recent past, we saw a lot of investment de-risking. Money was placed in shorter-dated bonds and liquidity funds that generally return good yields.

That trend will likely change towards more extended duration over the next three to six months.

We are also quite optimistic on the structural theme of artificial intelligence (AI), which we believe is a long-term trend.

We continue to believe it has a place in every portfolio, given the continuous development and advancement of AI.