Index-based investing
Index fund management has been at the heart of our business strategy since 1988; with this strong heritage we have developed our strategies to evolve with changing markets and client objectives.
Our philosophy
Passive funds are only as good as the indices they track. Index selection is a major contributing factor to strong investment performance.
- We select indices with the greatest transparency and liquidity that capture the best possible representation of the market
- We take a pragmatic approach to managing index funds with two equally important objectives: close tracking and increasing risk-adjusted returns
Our process
Our tracking methodology and management approach focus on adding value; we aim for returns that closely track the index, while remaining within target tracking tolerances.
- Our teams have a clear focus on managing risk at the start of the portfolio construction process and on a daily basis thereafter
- We minimise explicit and implicit transaction costs to mirror index returns as closely as possible
- Portfolios are implemented using physical replication and optimisation
- Intelligent and efficient handling of index changes, corporate actions and dividend enhancement
HSBC strengths
- The large scale and the diversity of our index strategies allow us to deal at competitive prices and minimise costs for our clients
- Our index-based strategies cover global, regional and country indices using multiple vehicles such as ETFs, pooled funds, segregated mandates
Cost-efficient index replication
Characteristics
- Efficient exposure to a broad range of traditional market-cap indices
- Transparent end-to-end process focused on minimising implementation costs
- Disciplined risk-controlled investment approach
- Physical replication (full or optimised)
- Intelligent implementation of index changes, corporate actions and dividend enhancement
Passive implementation
- Global, regional and single country indices
- Multiple vehicles: ETFs, pooled funds, segregated mandates
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in foreign markets involve risks such as currency rate fluctuations, potential differences in accounting and taxation policies, as well as possible political, economic, and market risks. These risks are heightened for investments in emerging markets which are also subject to greater illiquidity and volatility than developed foreign markets. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in Emerging Markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade.