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Stuart White CEO HSBC Global Asset Management (UK) Limited
I am pleased to publish our fourth annual Assessment of Value report. We have made further subtle changes to enhance the quality of the report and provide investors with a simple to understand and fair appraisal of the value delivered by our funds.
Some of the key improvements we have made to our funds and processes since last year’s report include:
Consumer Duty review and implementation - Our processes have been reinforced with the new Consumer Duty standards which included enhancing product reviews, testing product literature, and improving aspects of our customer journey
Rationalisation of our UK fund range continues – We have merged one fund and closed another sub-scale fund
Investment Excellence process – Our investment teams have been given more flexibility to adopt a multi-style investment approach on our active funds to try to enhance performance and deliver better outcomes for our investors
Focus on sustainability – We published our first set of Task Force on Climate-related Financial Disclosures (TCFD) reports in June 2023. These provide information about the climate impact and risks of the assets held by HSBC Global Asset Management (UK) Limited as a whole, and of the assets held by each of the funds
For more information on these improvements and the other ways we continue to deliver value for our fund investors in the UK, please read the full report.
The Financial Conduct Authority (FCA) provided managers with seven minimum criteria to consider when assessing the value of their funds. We took these criteria and, from an investors point of view, asked ourselves the following questions. We have provided more detail on how we have assessed each of these areas in the methodology section of this report.
Quality of service
How have our funds measured up against a series of areas that we believe are important to the overall investment experience? These include operational oversight, our investors’ experience, risk management, investment capability and our responsible investment framework.
Performance
Have our funds and share classes achieved their performance objective and other measures within their investment policy and strategy? How does performance compare to other similar funds and share classes available from other fund managers?
AFM costs – general
What is the breakdown of our fund charges? Are the costs of our funds and related services offering you fair value?
Economies of scale
Are savings and benefits that we achieve through our fund’s and HSBC AM’s size and scale being shared with investors?
Comparable market rates
How do the costs compare to the costs of other similar funds available from other fund managers?
Comparable services
How does the fund compare to other similar funds, institutional mandates and share classes offered by HSBC with similar investment objectives and policies?
Classes of shares
Are investors in the best share class they are eligible for? Are the points of differentiation between these share classes appropriate and justified?
Our ratings framework
We have used a two-tier system to conduct our Assessment of Value. Firstly, we assessed our funds and share classes against the seven minimum assessment criteria detailed in the table below and rated each of these individual assessments against a traffic light system using the following principles:
Green
Our assessment of this criteria has found that the fund/share class is delivering good value to investors for these criteria and no material issues have been found.
Amber
Our assessment of this criteria has found that the fund/share class is delivering moderate value to investors for these criteria, however, there are areas that need management action and/or oversight.
Red
Our assessment of this criteria has found that the fund/share class is delivering poor value to investors for these criteria and there are areas where management action has been or will be taken.
The following table shows each of the seven minimum assessment criteria we have used to assess our funds.
Overall value conclusion
Secondly, we considered all of the individual criteria assessments for each fund’s share class at an aggregated level to determine an overall value conclusion for each share class. Considering each of the seven assessment criteria equally we came up with a quantitative view of the overall value conclusion. Provided with this information, as well as other qualitative information about the funds and other quality of service considerations, the Board was able to take a measured view on the overall value delivered to investors. We used a second traffic light system and set of principles to conclude on our Board’s overall evaluation of each fund/share class. These are the ratings you will see in the two-page summaries for each of the funds:
Met
Having considered the fund’s costs, performance, and the quality of service provided to our investors, we believe that the fund is delivering good value.
Partially Met
Having considered the fund’s costs, performance and the quality of service provided to our investors, we believe that the fund is delivering value in most areas. Management action may be necessary or has already been taken and we will review its effectiveness.
Not Met
Having considered the fund’s costs, performance and the quality of service provided to our investors, we believe that the fund is not delivering value and management action has been or will be taken.
HSBC index funds
(The overall value conclusion shown is for the Investment Association primary share class)
Overall value conclusion
American Index Fund
Developed World Sustainable Equity Index Fund
European Index Fund
FTSE 100 Index Fund
FTSE 250 Index Fund
FTSE All-Share Index Fund
FTSE All-World Index Fund
Japan Index Fund
Pacific Index Fund
Sterling Corporate Bond Index Fund
UK Gilt Index Fund
USA Sustainable Equity Index Fund
HSBC multi-asset funds
(The overall value conclusion shown is for the Investment Association primary share class)
Overall value conclusion
Balanced Fund
Global Strategy Adventurous Portfolio
Global Strategy Balanced Portfolio
Global Strategy Cautious Portfolio
Global Strategy Conservative Portfolio
Global Strategy Dynamic Portfolio
Monthly Income Fund
World Selection – Adventurous Portfolio
World Selection – Balanced Portfolio
World Selection – Cautious Portfolio
World Selection – Conservative Portfolio
World Selection – Dividend Distribution Portfolio
World Selection – Dynamic Portfolio
World Selection – Interest Income Portfolio
HSBC sustainable multi-asset funds
(The overall value conclusion shown is for the Investment Association primary share class)
Overall value conclusion
Global Strategy Sustainable Adventurous Portfolio
Global Strategy Sustainable Balanced Portfolio
Global Strategy Sustainable Cautious Portfolio
Global Strategy Sustainable Conservative Portfolio
Global Strategy Sustainable Dynamic Portfolio
Global Sustainable Multi-Asset Adventurous Portfolio
Global Sustainable Multi-Asset Balanced Portfolio
Global Sustainable Multi-Asset Cautious Portfolio
Global Sustainable Multi-Asset Conservative Portfolio
Global Sustainable Multi-Asset Dynamic Portfolio
HSBC active funds
(The overall value conclusion shown is for the Investment Association primary share class)
Overall value conclusion
Corporate Bond Fund
Europe Ex-UK Equity Fund
Global Property Fund
Income Fund
UK Growth & Income Fund
UK Multi-Factor Equity Fund
US Multi-Factor Equity Fund
Our conclusions
The table below shows the overall conclusion of our assessment, and it is encouraging to see that the majority of funds and share classes deliver value. However, the report also identifies funds and share classes that are not, or that are only partially, providing value. For those funds or share classes we have detailed the actions that we have already taken, or that we commit to take, within the individual two-page fund reports.
Green
Amber
Red
Asset under Management (AUM)
£44.83bn
£322m
-
Percentage of AUM
99%
1%
-
Number of funds
40
3
-
Percentage of funds
93%
7%
-
Where we have rated a fund or share class as green, we consider that the fund’s costs, performance, and the quality of service provided, delivers good value to our investors. Although amber-rated funds or share classes deliver value in most areas, we believe these require more frequent review and/or some management action to be taken.
Since last year, we completed a number of actions to improve value for investors. A full explanation of these actions has been included in our Assessment of Value report. The Board will continue to challenge the business where they feel action needs to be taken.
We hope that this Assessment of Value report provides our investors with a simple way to assess the value delivered by their funds.
Risk Warning
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.
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