HSBC opens New Frontiers Fund

HSBC Global Asset Management is to open its New Frontiers fund to select institutional and high net worth investors.

The HSBC New Frontiers fund, managed by Andrea Nannini and team of Halbis, the active management specialist of HSBC Global Asset Management, offers exposure to the next generation of emerging markets.

The fund was launched in February 2008 and until now had been available exclusively to clients of the HSBC Private Bank, raising US$300 million in the three months following launch. However, an institutional share class (with minimum investment of US$5 million) and high net worth share class (minimum US$1 million), will be opened to enable access for select institutional and high net worth investors with long-term investment horizons.

Barbara Rupf Bee, Head of Institutional Sales at HSBC Global Asset Management, comments that because the New Frontier markets are rather illiquid, it is necessary to carefully manage capacity and access to the fund. Therefore, HSBC Global Asset Management would look to raise assets very selectively to ensure that existing investors are not compromised.

She adds: "It is of utmost importance that only appropriate and carefully chosen investments are added to the portfolio as they are identified by the fund management team. Therefore, inflows must be controlled."

The HSBC New Frontiers fund is structured as a Luxembourg-based Specialist Investment Fund (SIF), which can be sold via private placement in select countries where permitted. The fund offers monthly liquidity, and a one-month prior notice period is required for redemptions.

Rupf Bee says: "HSBC Global Asset Management is opening up the fund to institutional and high net worth investors in order to cater for strong demand for this asset class. These markets are at an earlier stage of development than the better known emerging markets, and therefore offer potentially strong growth opportunities. New Frontier markets are often overlooked and under researched, meaning there is potential to find compelling investment opportunities. HSBC is an early investor in New Frontier markets, having built up a team of high-calibre experts in this area, and by launching this fund."

Nannini adds: "Among their many features, the New Frontier markets are experiencing rapid economic growth. This is structurally driven by access to capital and technology from the developed world, favourable demographics, a population base of more than 1.2 billion people and robust commodity prices. Meanwhile, many of the Frontier markets are experiencing stronger GDP growth, rising income per capita, larger current account balances, as well as increasing political stability."

He says particularly in times of heightened global stock market volatility, New Frontier markets offer important benefits because they offer a low level of correlation to other markets.

In managing the fund, Nannini and his team invest in a diversified portfolio of 60-90 securities of companies located in or operating in the New Frontier markets, as defined by a bespoke universe created by Halbis. The fund invests predominantly in listed stocks, however there is scope to include some exposure to unlisted companies and pre-IP0s.

Over the period from launch (4 February 2008) to end May 2008, the HSBC New Frontiers fund has outperformed the main New Frontier benchmarks by delivering a return of 3.69% net of fees.

HSBC Global Asset Management is among the world's largest managers of emerging markets. At end 2007, HSBC Global Asset Management had almost US$100 billion emerging markets assets under management.