Change of direction for HSBC Hong Kong fund

HSBC has converted its 24m Hong Kong Growth fund into a new fund with the objective of investing in equities from mainland China, Hong Kong and Taiwan.

Based in Hong Kong, Philip Mok will continue to manage the fund, which has now been renamed the HSBC Greater China Growth fund. The fund is benchmarked against the MSCI Golden Dragon index and carries an initial charge of 4%, as well as an annual management charge of 1.5%. The change took effect late last week.

The HSBC Hong Kong Growth fund was originally launched in 1985 and was previously able to invest only in securities listed on the Hong Kong stock exchange.

The initial launch period for the HSBC Asia Freestyle fund also came to an end last week (see Fund Strategy, June 6). The fund, an onshore version of the group’s Luxembourg-domiciled Asia Freestyle Sicav, is jointly managed by Ayaz Ebrahim, HSBC chief investment officer for Asia-Pacific ex Japan equities, and Sam Lau, director of Asia ex Japan equities in Hong Kong.

The fund invests in 30-50 stocks from across Asia – excluding Japan and Australia – with no more than a 10% portfolio weighting for each of the region’s smaller markets, including Thailand, Indonesia and the Philippines. The larger Asian markets will have no more than a 40% weighting in the portfolio, according to Ebrahim.

The investment process for the fund is based on the group’s “freestyle” approach, which involves a low level of turnover, no benchmark and investment in companies with sustainable fundamentals and clear valuation disciplines.

According to Ebrahim, in the Asian market in particular a stock-specific approach adds more value. “Traditional funds where you try to outperform a benchmark are not going to be particularly rewarding for investors,” he says.

Both the Asia Freestyle fund and the Greater China fund are subfunds of the group’s onshore Specialist Investment Funds Oeic and are managed by the HSBC Halbis Partners group.

The offshore Sicav version of the Asia Freestyle fund was launched in April 2004 and has its highest geographical weightings in Hong Kong, South Korea and India.