19 October 2023: Wealth Product Ideas
HSBC Ultra Short Duration Bond Fund
Company Profile:
- HSBC Asset Management, headquartered in London, was established in 1973. As of June 2023, it manages assets worth USD 651 billion.
- Fund management team consists of Jason E Moshos (15 years with HSBC, formerly AllianceBernstein) and Viral Desai (8 years with HSBC).
Investment Strategy:
- Aims to provide short-term capital growth and income through investments in bonds and money market instruments, whilst promoting ESG characteristics.
- Average duration of its portfolio holdings is not expected to exceed one year (“Ultra Short”). Current average duration is 0.61 years.
- At least 70% of the Fund is invested in a diversified mix of fixed and floating-rate bonds from developed and emerging market issuers.
- Identification and analysis of issuer’s ESG credentials is an integral part of its decision-making process.
Why Short Duration Bonds?
- Provides income potential while carrying less interest rate risk than longer-term bonds.
- Offers downside protection in rising/uncertain rate environments due to lower sensitivity to rates changes.
- Delivers risk-adjusted returns through market cycles with less pronounced drawdowns.
- Mitigates credit risk with shorter time horizon to maturity.
- Adds diversification, hedging against movements in longer term interest rates.
- Offers liquidity for rebalancing with little impact on market prices.
Risk Profile:
- The Fund is categorized as a Conservative investment option given its focus on high-quality, investment grade bonds with short maturities. With an average credit quality of A and a 3-year volatility of 2.26%, it demonstrates both stability and a lower level of risk.
- The Fund, operating under a mandate that permits investment in Investment Grade, Non-Investment Grade bonds and unrated bonds, is suitable for investors comfortable with the associated risks, across both developed and emerging markets.
Fund Performance and Advantages:
- As of August 2023, the Fund has delivered a net return of 3.97% YTD, with an annualized return of 2.36% since its inception in June 2021.
- Ranked 13th out of 233 in US Dollar Short Term funds over 12 months and 3rd out of 221 in US Dollar Short Term funds over 24 months (Citywire Selector). Received a “5” rating on its Lipper Leader Scorecard.
- Benefits include relatively attractive yields, portfolio flexibility, and lower risk from interest rate changes.
- Current YTM is 6.21% with a dividend yield of 5.66% p.a., distributed monthly.
Fund’s ESG Credentials:
- Integrates ESG analysis to reduce risk and boost long-term returns.
- Assesses environmental, social and governance factors of all issuers.
- Applies strict exclusion filters like tobacco producers.
- Actively managed to select ESG leaders, not simply index replication.
- Engages with holdings to encourage stronger sustainable practices.
(Source: Refinitiv)
HSBC GIF Ultra Short Duration Bond Fund: Price Performance Over 5 years
- The Fund has demonstrated above-average returns compared to its Sector Average in the 12 months since September 2022.
(Source: Citywire Selector)
Fund’s Latest Sector Allocation as of end-Aug 2023
(Source: HSBC Asset Management, August 2023 Factsheet)
