HSBC launches global inflation linked bond fund
Aug, 16, 2010 01:00 AM - CPI Financial
HSBC Global Asset Management has launched a Global Inflation Linked Bond fund that invests in a diversified portfolio of sovereign inflation-linked bonds issued by OECD countries such as Australia, Canada, Sweden, UK, US, Japan and some countries in the Eurozone.
Managed by HSBC Global Asset Management's quantitative based fixed income team led by Jean-Charles Bertrand, Chief Investment Officer, Quantitative Strategies, the HSBC GIF Global Inflation Linked Bond fund follows a quantitative management approach to inflation linked bonds (ILBs) which has been successfully implemented since the team launched its first ILB fund in 2000. This team manages more than $2.7 billion in inflation linked bond assets (as at end June 2010).
"To leverage the success of this team's ILB strategies among a broader investor base, HSBC Global Asset Management has launched the global ILB strategy through a Luxembourg-based SICAV within HSBC's flagship Global Investment Funds (GIF) range," HSBC said.
Given current economic uncertainties, HSBC Global Asset Management believes that future inflation is a concern. Accommodating monetary policies, combined with significant public deficits in developed economies, may lead to higher realised inflation in the next three to five years. In the short-term, inflation pressure is likely to derive from emerging countries' strong economic growth, demand for commodities and currency appreciation.
Bertrand adds, "Inflation linked bonds provide the most effective hedge against inflation when compared to other asset classes, including real estate and commodities, as they are the only asset class whose return is directly adjusted to the realised rate of inflation. In addition, inflation linked bonds demonstrate low correlation to nominal bonds, diversify a fixed income portfolio and improve its overall risk-adjusted potential."
The HSBC GIF Global Inflation Linked Bond fund seeks to add value primarily through country allocation and is completely hedged against currency risk. Minimum investment is $1 million for institutional investors and $5000 for retail investors, with annual management fees of 0.35 per cent and 0.70 per cent respectively. The fund has daily liquidity and is available in the base currencies of: EUR, GBP, HKD, SGD and USD.