HSBC GIF Brazil Equity fund reaches US$1 billion milestone

The HSBC GIF Brazil Equity fund has surpassed the US$1 billion mark less than three years after launch, following strong investor appetite and good absolute and relative fund performance.

This Luxembourg-based fund - now the largest actively managed offshore fund in the world investing in Brazilian equities - is part of HSBC's flagship Global Investment Funds (GIF) SICAV range, which has UK distributor status. Among European funds with a Brazil equity focus, this fund now accounts for 55% of all assets under management according to data provided by Feri, to end December 2006.

The SICAV also encompasses HSBC’s US$4.77 billion Chinese Equity, US$6.09 billion Indian Equity and US$ 2.97 billion BRIC Freestyle funds, also among the world's largest funds in their respective sectors.

Managed by Luiz Ribeiro, the HSBC GIF Brazil Equity fund was launched in August 2004 and aims to provide investors with an opportunity to benefit from a compelling investment case and the fund management expertise of HSBC through its specialist active management unit Halbis, which has a team based in Sao Paulo, Brazil. In Brazil, HSBC is amongst the top five asset managers in terms of assets under management, according to a National Association of Investment Banks (ANBID) survey in December 2006.

Over the period from launch on 31 August 2004 to 31 January 2007, the HSBC GIF Brazil Equity fund has gained 195.2%, in dollar terms, bid to bid, gross of income, according to figures provided by Standard & Poor’s.* This outperforms the MSCI Brazil Index, which returned 189.2% over the same period, and positions the fund as first in its peer group.

Christian Deseglise, Global Head of Emerging Markets Business at HSBC Investments, said the HSBC GIF Brazil Equity fund had attracted inflows from sophisticated investors seeking exposure to the rapidly developing market, which was benefiting from an improving economic backdrop and strong global demand for commodities.

He said despite strong stock market performance, companies within Brazil remained attractively valued. The forward price earning ratio for 2007 of the Brazilian market was just 9.5 times and Halbis expects that earnings growth could exceed 20% in 2007.*

On the economic front, interest rates are low by historic standards at 13% and Deseglise expects these will continue to come down as inflation remains under control. GDP is expected to accelerate slightly in 2007 to around 3.8%.

Brazilian exports continue their rapid growth and the trade surplus is expected to reach $38bn in 2007, according to the Institute for International Finance, December 2006. The re-election of President Luiz Inacio Lula da Silva last October has provided some political stability, Deseglise said.

Ribeiro, manager of the fund, added: “The Brazilian stock market has performed extremely well, but Halbis believes the party is not over yet. The combination of a healthy economy, attractive company valuations and a recovering consumption and credit cycles, means the market is well placed to make further strong progress in the years ahead.”

A portion of the annual management fee from the HSBC GIF Brazil Equity Fund is donated to BrazilFoundation, a charitable organisation that funds socially responsible health and educated-related projects in Brazil.