HSBC launches Russian Equity fund

HSBC GIF Russia Equity is a subfund of HSBC’s flagship Luxembourg-based Global Investment Funds (GIF) SICAV range, which is available for sale in 35 countries throughout the world, and has UK distributor status.

HSBC Investments, one of the world’s largest emerging markets asset managers (1), has launched a Russian Equity fund.

HSBC GIF Russia Equity is managed by Halbis, the active management specialist of the HSBC Group. The lead manager is Douglas Helfer (2), who has a 10-year track record in managing Russian equities.

Retail and institutional share classes are available at minimum investment levels of US$5,000 and US$1 million respectively. The HSBC GIF Russia Equity fund launched on 17 December 2007 and is now in the process of being registered for sale throughout the world.

Benchmarked against the customised MSCI Russia 10/40 Index, HSBC GIF Russia Equity is managed in a similar way to that of a Russian equity fund which is managed by Helfer and sold to clients in Japan. That fund was launched on 30 March, 2007 and has raised approximately US$300 million to date.

The new HSBC GIF Russia Equity fund holds a concentrated portfolio of 20-30 stocks which could include locally-listed Russian equities, American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). The majority of assets are invested in large liquid blue chip stocks though up to a third of the portfolio could be invested in mid cap companies. Helfer constructs the portfolio through bottom up stock picking and takes an unconstrained approach to sector allocation.

Helfer said Russian equities offer compelling investment opportunities. Russia has a large economy that is entering its eighth year of rapid growth. Although the economy was initially driven by commodity exports, growth is now being fuelled by domestic consumption and investment.

Helfer said: “Over the past few years, Russian stocks have delivered a good return. However, despite their rapid rise, Russian equities still remain attractively valued and amongst the cheapest of the emerging markets.

“Russian equities are trading on a 2008 consensus price earnings ratio of 10.5 times, compared to the broader global emerging markets universe of 13 times.. At the same time, corporate profits continue to grow at a fast pace, particularly in the consumer and finance sectors, where growth is more than 30%. The presidential elections, due to take place in early 2008, should act as a catalyst to strong growth”

Christian Deseglise, Global Head of Emerging Markets Business at HSBC Investments, said taking a contrarian view, HSBC has been overweight in Russian equities within its broader Emerging Markets and BRIC funds for most of 2007.

Deseglise said HSBC holds a dominant position in the market for single country emerging market equity funds. The group manages the world’s largest Indian equity fund (at US$8.37 billion), the world’s largest actively managed Brazilian equity fund (US$2.66 billion) and the world’s second largest Chinese equity fund (US$7.34 billion). Figures are to end September 2007.

“The launch of a Russian equity fund further cements HSBC’S leadership position in the emerging markets sector,” Deseglise said.