HSBC opens New Frontiers fund

2 July 2008

HSBC Global Asset Management is to open its New Frontiers fund to select institutional and high net worth investors.

The HSBC New Frontiers fund, managed by Andrea Nannini and team of Halbis, the active management specialist of HSBC Global Asset Management, offers exposure to the next generation of emerging markets.

The fund was launched in February 2008 and until now had been available exclusively to clients of HSBC Private Bank, raising USD300 million in the three months following the launch. However, an institutional share class (with minimum investment of USD5 million) and high net worth share class (minimum USD1 million), will be opened to enable access for select institutional and high net worth investors with long-term investment horizons.

Barbara Rupf Bee, Head of Institutional Sales at HSBC Global Asset Management, comments that because the New Frontier markets are rather illiquid, it is necessary to carefully manage capacity and access to the fund. Therefore, HSBC Global Asset Management would look to raise assets very selectively to ensure that existing investors are not compromised.

She adds, “It is of utmost importance that only appropriate and carefully chosen investments are added to the portfolio as they are identified by the fund management team. Therefore, inflows must be controlled.”

The HSBC New Frontiers fund is structured as a Luxembourg-based Specialist Investment Fund (SIF), which can be sold via private placement in select countries where permitted. The fund offers monthly liquidity, and a one-month prior notice period is required for redemptions.

Rupf Bee says, “HSBC Global Asset Management is opening up the fund to institutional and high net worth investors in order to cater for strong demand for this asset class. These markets are at an earlier stage of development than the better known emerging markets, and therefore offer potentially strong growth opportunities. New Frontier markets are often overlooked and under researched, meaning there is potential to find compelling investment opportunities. HSBC is an early investor in New Frontier markets, having built up a team of high-calibre experts in this area, and by launching this fund.”

Nannini adds, “Among their many features, the New Frontier markets are experiencing rapid economic growth. This is structurally driven by access to capital and technology from the developed world, favourable demographics, a population base of more than 1.2 billion people and robust commodity prices. Meanwhile, many of the Frontier markets are experiencing stronger GDP growth, rising income per capita, larger current account balances, as well as increasing political stability.”

He says particularly in times of heightened global stock market volatility, New Frontier markets offer important benefits because they offer a low level of correlation to other markets.

In managing the fund, Nannini and his team invest in a diversified portfolio of 60-90 securities of companies located in or operating in the New Frontier markets, as defined by a bespoke universe created by Halbis (2). The fund invests predominantly in listed stocks: however there is scope to include some exposure to unlisted companies and pre-IPOs.

Over the period from the launch (4 February 2008) to end-May 2008, the HSBC New Frontiers fund has outperformed the main New Frontier benchmarks by delivering a return of 3.69 per cent net of fees (3).

HSBC Global Asset Management is among the world’s largest managers of emerging markets. At end-2007, HSBC Global Asset Management had almost USD100 billion emerging markets assets under management.

Notes to editors:
Media enquiries to:

Jenne Mannion
Telephone: 44 0 20 7024 0444
or at e-mail jenne.mannion@hsbc.com

Jane Crookbain
Telephone: 44 0 20 7024 0412
or at e-mail jane.crookbain@hsbc.com

1. To make the fund available to institutional investors, two new share classes have been opened. The high net worth share class requires a minimum investment of USD1 million and carries an annual management fee of 1.75 per cent. This share class is only available to professional investors.
   
   The institutional share class, available for minimum investments of USD5 million, is available with an AMC of 1.25 per cent.
   
   If these shares are redeemed within 12 months, an early redemption fee of up to one per cent may be charged, in order to protect existing investors within the fund.
   
   To align interests of investors with the manager, a performance fee of 20 per cent above the return of the MSCI Emerging Markets Equity Net Total Return Index is charged on both share classes. Any underperformance of the fund is carried forward to future years. Both share classes charge a dilution levy of up to 2.5 per cent.
   


2. Halbis has created a bespoke Frontier universe. Frontier markets, as defined by Halbis, are those considered Pure Frontier Emerging markets, plus those in mainstream emerging Markets, that show Frontier characteristics. These include, for example, Jordan, United Arab Emirates, Colombia, Morocco, the Phililppines, Peru, Argentina, Mauritius, Botswana, Kuwait, Kazakhstan, Croatia, Estonia, Ghana, Kenya, Egypt, Pakistan, Vietnam, Qatar, Romania, Slovenia and Ukraine.
   


3. From 4 February 2008 to 31 May 2008, the MSCI FM Frontier Markets Index returned 0.34 per cent, the S&P Frontiers Extended Index returned 2.28 per cent and the S&P Frontiers Select Index returned -3.36 per cent. Over the same period, the HSBC New Frontiers fund has posted a gain of 3.69 per cent, net of fees, therefore outperforming the main New Frontier benchmarks.
   

** The HSBC New Frontiers fund is not available for sale in Italy

HSBC Global Asset Management

HSBC Global Asset Management comprises four specialist businesses: Halbis, Sinopia, Multimanager and Liquidity. HSBC Multimanager and HSBC Liquidity are global business units which are part of HSBC Global Asset Management. Halbis Capital Management (‘Halbis’) and Sinopia Asset Management (‘Sinopia’) are legally established as separate companies.

In total, HSBC Global Asset Management manages USD397.4 billion (as at end March 2008). Through its network of offices in over 20 countries around the world, HSBC Global Asset Management develops strong relationships with corporates, institutions and financial intermediaries of all sizes and types. HSBC Global Asset Management acts as the global representative of its specialist investment businesses.

HSBC Global Asset Management is part of HSBC Global Banking and Markets, a division of HSBC Holdings plc.

For more information, see www.assetmanagement.hsbc.com

Halbis

Halbis is an active investment manager focused on delivering sustainable value-added performance in selected areas of the global market. It specialises only in areas where it is or will be highly competitive, namely European equities, value-added fixed income, Asian and emerging markets equities, and some alternative strategies. Halbis manages assets of USD88.4 billion (as at end-March 2008).

For further information, please visit: www.halbis.com

HSBC Holdings plc

HSBC Holdings plc serves over 128 million customers worldwide through around 10,000 offices in 83 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of some USD2,354 billion at 31 December 2007, HSBC is one of the world’s largest banking and financial services organisations. HSBC is marketed worldwide as ‘the world’s local bank’.