Download HSBC GIF BRIC Freestyle Equity Fund

HSBC GIF BRIC Freestyle Equity Fund
Sales aid
For professional advisers only
July 2009
Why BRIC Equities?
Population
2000
2008
2,594 million*
2,803 million*
Average age
30.9 years*
31 years*
Labor force
1,246 million*
1,492 million*
GDP PPP
$6,877 billion*
$13,905 billion*
6.1%*
8.4%*
Exports
$353 billion*
$1,564 billion*
Imports
$312 billion*
$1,278 billion*
GDP Growth
Facts
Brazil has the world’s largest commercial cattle herd (50% larger than the US) at 190 million heads.
Russia’s foreign exchange and gold reserves have exceeded $500 billion and accounts for 38% of all natural resources in the world.
In India, personal consumption makes up for 67% of GDP, much higher than any other Asian country.
China is poised to become the world’s 3rd largest economy.
* Source : Indexmundi.com, June 2009
Market
BRIC is an acronym that refers to the fast growing developing economies of Brazil, Russia, India, and China having a potentially significant future
impact on the global economy.
China and India have had phases of good economic performance through the 1990’s and later. At the same time, though not as remarkable, the
Russian Federation, after the collapse of the communist regime, has also shown potential for rapid economic growth. The BRIC economies face
challenges to improve the functioning of their states, improving the current ineffective law and order systems, reduce corruption and managing
the current high levels of inequality and poverty. The BRIC economies have to varying degrees shown rapid economic growth, increasing market
size across all sectors and a burgeoning middle class in recent years.Each of the BRIC countries also have multiple and different attributes and thus
each is distinct.
Bright prospects for BRIC markets long-term growth potential – The expectations of long term growth in BRIC market economies are supported
by a combination of positive demographics, increased industrialisation and an abundance of natural resources. The average economic growth in
2009 for BRIC markets is expected to be 6.8% compared to a 0.8% decline for developed countries.
Diversification benefits – BRIC markets complement developed and western economies and also have individual strengths. China is a
leading global manufacturer across a wide range of industries, facilitated by its abundant labor resources. The Indian economy benefits from
specialisation in services, outsourcing, technology and pharmaceuticals. Brazil’s focus is on agricultural commodities and energy resources,
whilst Russia has a large percentage of the world’s oil and gas reserves.
The BRIC economies have seen significant changes in the recent past in their socio-political-economic spheres. However, they do suffer from
various inadequacies to be able to reach the development levels of many advanced nations. Today, these economies must continue to outperform
their competitors, as investors have an easy access to different alternatives.
China’s productivity growth, like its economy, has been accelerating for years, and exceeded 11% in 2008! India and Russia are posting productivity
growth rates close to 7% over the last two years. That’s up from an average of just 4% for both nations in the 1995 to 2008 period. Brazil is lagging
in the productivity party, but is catching up fast, with growth of nearly 5% in 2008. Overall, the four BRIC economies averaged productivity growth
of more than 8% in 2008, compared to just 1.2% for the G7 nations! Since they are developing rapidly, by 2050 the combined economies of the
BRICs could eclipse the combined economies of the current richest countries of the world. The progress of the BRICs will be critical to how the
world economy evolves. If these economies can fulfil their potential for growth, they could become a dominant force in generating spending
growth over the next few decades.
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*Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets.
HSBC GIF BRIC Freestyle Equity Fund – Investment Process
The fund offers investors access to the potentially exciting investment long term investment opportunities that exist within Brazil, Russia, India and
China ‘BRIC’ stock markets.
It is managed on a total return basis without benchmark constraints.
It is managed on an active fundamental basis by a small group of decision makers who are backed by over 200 Emerging Markets investment
professionals located in 18 countries.
Investment Process
1.
Tactical country allocation is a positive contributor to performance
2.
Allocation model based on valuation and expected volatility
3.
Major market moves in the BRIC countries can often be explained by valuation extremes
4.
Valuation discipline guides the process
5.
The country allocation committee meets on a regular basis to:
Consider the valuation measures and results of the allocation model
Discuss global/regional/sector views, macroeconomic development and political risks, country valuations, and market liquidity
Discuss how country managers see the prospects of their stocks
Decide how to allocate the Fund’s assets between countries
Process Workflow
Sao Paulo based
team of 8
José Cuervo
London
London based
team of 3
Doug Helfer
Russia
Singapore based
team of 3
Sanjiv Duggal
India
Nick Timberlake
+ Team of 3
Hong Kong based
team of 13
Richard C. Wong
China
Stock Selection
Qualitive Economic
Views
Chris Cheetham
Global CEO
Qualitive Valuation
Model
Asset Allocation
Committee
Guillaume Rabault
Economic Research
Paris-based team of
7 strategies
Investment Advice
HSBC GIF
BRIC Freestyle
Equity Fund
Independent Risk
Control
Portfolio Construction
Total return-driven
- Aiming to achieve consistently good returns, in a variety of market conditions.
- The portfolio is fully invested, except when stocks are deemed unattractive.
- In such instances the fund manager may hold up to 33% of the fund in cash.
No benchmark constraints
- Investing in companies, not in market return
- No country, sector and market capitalisation constraints
A concentrated portfolio or our preferred stocks
- Stock selection looks for best ideas (stocks with sound fundamentals and room to grow)
- Country portfolios are kept lean
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The HSBC GIF BRIC Freestyle Equity Fund
The Team
Based in London
Based in London
José Cuervo
Nick Timberlake
Portfolio Manager
Brazil Equity
BRIC Fund Manager
Head of GEM Equity
Based in Singapore
Based in Hong Kong
Sanjiv Duggal
Richard C. Wong
Portfolio Manager
Indian Equity
Portfolio Manager
Chinese Equity
Based in Paris
Based in London
Guillaume Rabault
Doug Helfer
Global Head of GEM
Research
Senior Fund Manager
Russian Equity
Fund Characteristics
Universe: Brazil, Russia, India and China (including Hong Kong)
Number of stocks: concentrated portfolio of our preferred BRIC stocks
Management fees: 1.00% Tax included
Performance fees: 20% of the positive performance above a hurdle rate of 5%
Subscription fees: 5.54% maximum tax included
Redemption fees: NONE
Dealing: Daily before 10:00 (CET)
Valuation: Daily
Settlement: Trade day + 4 business days
Contact our Adviser Services Team on:
Email:[email protected]
www.globalfunds.hsbc.com
There are risks involved with this type of investment. Please refer to the Prospectus for general risk factors, and to the Simplified Prospectus for specific risk factors. It is important to
remember that your investment is not guaranteed and you may not get back the amount you originally invested. Investments in emerging markets are by their nature higher risk and
potentially more volatile than those inherent in established markets. You should view this investment as medium to long-term, and should plan to keep it for at least five years. The
shares in HSBC Global Investment Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to
its jurisdiction, or to United States Persons. All applications are made on the basis of the current HSBC Global Investment Funds Prospectus, Simplified Prospectus and most recent
annual and semi- annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited or the local distributors.
This document is issued by HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ, UK. Authorised and regulated by the Financial
Services Authority and registered as number 122335. © Copyright. HSBC Global Asset Management 2009. All Rights Reserved.
This product is marketed in a sub-distributing capacity on a principal – to – principal basis by the HSBC Global Asset Management MENA, a unit that is part of HSBC Bank Middle East
Limited, PO Box 66, Dubai, UAE, which is incorporated and regulated by the Jersey Financial Services Commission. Services are subject to the Bank’s terms and conditions. HSBC
Bank Middle East Limited is a member of the HSBC Group. 16925/AS/0709