HSBC launches UCITS European Absolute Return Fund

HSBC Global Asset Management will launch a UCITS III European Absolute Return Fund in April 2010, subject to final approval.

The HSBC GIF European Alpha Equity Fund will seek opportunities - via a market neutral strategy - across developed Europe, implemented primarily through equities and equity swaps.

The investment vehicle, which offers daily liquidity, will target equity-like returns with a maximum annualised volatility target of 10%, with minimal correlation to European equities. The fund will be managed by a team of four, with Vis Nayar as lead manager.

In a universe of approximately 700 stocks, the team will look to exploit fundamental equity pricing anomalies using both complementary quantitative and qualitative strategies.

HSBC GIF European Alpha Equity Fund will use more short positions to diversify risk, holding about 80 stocks, typically split between 35 long and 45 short. The fund forms part of HSBC Global Asset Management's Luxembourg-domiciled Global Investment Funds (GIF) range, which is available for sale in around 35 countries.

Charles Robinson, Global Head of Alternatives Distribution, at HSBC Global Asset Management says: "This launch further expands our range of UCITS III absolute return strategies.  Moreover, it appears timely as the market backdrop seems more conducive to our market neutral strategy than the liquidity fuelled environment that defined most of 2009."

HSBC Global Asset Management has been running the same strategy within its flagship European Alpha Fund, domiciled in the Cayman Islands, since April 2008. Since then, the fund has outperformed the MSCI Europe Index and generated alpha on both the long and short portfolios.

Since its incubation, from April 2008, to the end of February 2010, the sub-fund has achieved a total return of 24.7%, while over the same period the MSCI Europe index, lost 20.1%. In 2008 alone, when the global financial crisis was heading towards its peak, the sub-fund, still achieved growth, of 13.1%. However, over the same period the MSCI Europe index fell by 35%. (Based on a gross exposure 200%. Source: Bloomberg. All performance figures are gross of costs, including management and performance fees, and are in Euro currency terms. Past performance is not a guide to future returns).

Robinson says: "This UCITS strategy builds upon the same principles of HSBC's flagship European Alpha Fund. Our existing investors know we piloted this over the past two years to complement, rather than cannibalise, our existing fund.

"This is not simply a UCITS clone of our popular Cayman domiciled European Alpha fund. Rather, it is a strategy constructed with daily liquidity in mind, greater capacity, and a risk/return profile that falls somewhere between our base class and our 2.5x levered share class.  While it is the same team and the same philosophy, it does differ as the low correlation with the existing fund reveals."

The minimum investment in the HSBC GIF European Alpha Equity Fund is US$5,000 for the retail share class and US$1 million for institutional while the annual management charges are 1.5% and 1% respectively. There is a performance fee of 20% over 1 Month EURIBOR, for both share classes.

The new fund represents a further addition to the platform of UCITS funds offered by HSBC Global Asset Management. Existing capabilities include the HSBC GIF Global Macro, HSBC GIF Global Currency, and the HSBC GIF Global Bond Market Neutral funds.