HSBC launches leveraged version of flagship absolute return

HSBC Global Asset Management has launched a leveraged version of its flagship absolute return portfolio, the HSBC GIF Global Macro fund, yesterday.

Like its sister fund, the newly launched HSBC GIF Global Macro II is structured as a Ucits III fund. Both funds are sub-funds of the HSBC Global Investment Funds, a Luxembourg-domiciled Sicav.

Guillaume Rabault and Jim Dunsford, who have managed the original fund since launch, will manage the new addition.

Rabault and Dunsford will apply the same strategy. They invest in a variety of liquid asset classes including cash, equities, bonds and currencies. They seek to exploit pricing anomalies by using complementary quantitative and qualitative based strategies.

The strategies can be either market-neutral, exploiting valuation differences across a given asset class, or directional. (article continues below)

In addition, the managers analyse opportunities in cross-asset classes aiming for a diversified portfolio. They are exposed to different asset classes primarily by taking long and short positions in financial derivative instruments such as equity futures, options, bond futures, credit default swaps, currency forwards and non-deliverable currency forwards.

Instead of gearing up in a conventional sense, Rabault and Dunsford construct the portfolio by doubling up all positions of their existing version. As the fund invests in highly liquid markets, even the leveraged version is expected to provide investors daily liquidity.

Charles Robinson, the head of alternative distribution, says the decision to launch a leveraged version of the existing fund was driven by client demand. As investors seek higher returns and are willing to take on more volatility, Robinson says, the base strategy is “too conservative” for some.

The team on HSBC GIF Global Macro II aims to deliver stable absolute returns with minimal correlation to major asset classes. The return target is to outperform the one month Euribor rate by 1200 basis points with a yearly volatility of 15%. This is twice the current volatility budget of the HSBC GIF Global Macro fund.