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Hedge Funds

Liquid diversified sources of alpha

Diversify your portfolio with hedge funds

Hedge funds' flexible approach can help improve a portfolio’s performance during market downturns.

At HSBC Asset Management, we employ a multi-strategy approach that filters the hedge fund universe to find what we believe to be the best funds for our clients.

The potential benefits of investing in hedge funds

  • Diversification
    Low correlation to traditional long-only assets.
    Improved risk return profile by potentially lowering total portfolio volatility.

  • Flexibility
    Well positioned to take advantage of changing market conditions.
    Adaptable to the evolution of regulation and prevailing asset class volatility.

  • Absolute returns
    Potentially benefit from both rising and falling prices through short selling.
    Access to return streams inaccessible in traditional investments (e.g., special situations or distressed debt investing).

  • Aligned interests
    Typically, the manager's own money is invested ("skin is the game").
    Fee structures consist of a management fee and a performance fee.

The value of investing through a multi-manager approach

Expertise

Backed by well-established investment processes and well-resourced, experienced investment teams.

Diversification

Allows diversification across managers and strategies.

Access

Aims to offer access to leading hedge fund managers which may be closed to new investors.

Scale

Investing as part of a large asset base offers the potential for negotiating advantages with hedge funds.

Investing with HSBC Asset Management

1

Philosophy

As a people business, identifying talent and
accessing this talent at the correct juncture
forms a central pillar to our investment philosophy.

3

Experience

Our extensive experience and critical mass can be
leveraged when negotiating capacity with hedge funds.

3

History

We have been selecting and investing in
hedge funds for over a quarter of a century.


Contact us

If you are considering investing in hedge funds, or want to learn more about our investment strategies, please get in touch.

Ready to talk?

Download our latest hedge fund publication

 

The case for Hedge Funds in the current market environment



 


Key Risks

 

  • Investors in hedge funds should bear in mind that these products can be highly speculative and may not be suitable for all clients.
  • There are several key issues that one should consider before making an investment into hedge funds. The risks specific to this type of investment may include, but are not limited to:

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.
Past performance does not predict future returns. The return may increase or
decrease as a result of currency fluctuations.

 

Regulation
The hedge fund industry is lightly regulated, with the majority of funds domiciled in offshore jurisdictions. Hedge funds are generally classified as “unregulated” and are not typically subject to the same levels of scrutiny and protection as a traditional investment fund. A thorough due diligence process can mitigate these concerns.

Gating
In event that redemptions requests on a particular dealing date are much higher than the normal level and full satisfaction would jeopardise the longer term portfolio balance, a gate or partial execution of redemption requests may be implemented generally on a pro-rata basis.

Side pocket
There may be instances when certain assets in a fund portfolio could become less liquid and the fund manager may segregate these illiquid positions from the main portfolio into a side pocket (or a separate vehicle).

Suspension of redemption
Suspension of redemption is a temporary halt in exiting the fund during a given redemption window. This is a stronger measure than gating because there is no dealing for the fund. This is generally used under special circumstances such as when liquidity conditions have markedly deteriorated in a short period of time or when there are heavy asset outflow such as the loss of a core investor.

Access
Hedge funds operate larger investment minima than traditional investment funds. Investors are often unable to access a hedge fund unless they were willing to invest USD500,000 to USD2m.

Transparency
Many hedge fund managers are wary of regularly publishing their positions in the belief that this will remove any advantage that they have over their peers. This can pose a problem to the investor, as he or she cannot be certain to which stocks, geographies, markets or even strategies he or she will be exposed to when investing in the hedge fund. However, trusted investors who have built strong relationships with the hedge funds can access this information for the majority of funds, enabling thorough monitoring of the investment.

Liquidity
Hedge funds typically have much longer dealing cycles than traditional investment funds. Depending on the strategy being utilised, a hedge fund may only allow subscriptions and redemptions on a monthly or quarterly basis. Furthermore, some hedge funds have long lock-up periods, where an investor is not permitted to redeem from the hedge fund unless a period of 6 months, a year or even 2 years has passed. Some may allow a redemption before the lock-up period is over, but the investor would have to pay a hefty penalty to be able to do this.

Manager failure
Over time, a number of hedge funds will close or fail, due to weak performance or operational difficulties. An investor must take this into consideration before making an investment, seeking professional advice to help minimise the risk of investing in a fund that is likely to fail.

The risk factors listed above are not exhaustive. 

Important Information

For Professional Clients only and should not be distributed to or relied upon by Retail Clients.

Issued and approved in the UK by HSBC Global Asset Management (UK) Limited (“AMEU”), which is authorised and regulated by the Financial Conduct Authority. HSBC Asset Management is a group of companies in many countries and territories throughout the world that are engaged in investment advisory and fund management activities, which are ultimately owned by HSBC Holdings Plc. HSBC Asset Management is the brand name for the asset management business of the HSBC Group.

The material contained herein is for marketing purposes and is for your information only. This document is not contractually binding nor are we required to provide this to you by any legislative provision. It does not constitute legal, tax or investment advice or a recommendation to any reader of this material to buy or sell investments. You must not, therefore, rely on the content of this document when making any investment decisions. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe to any investment. The contents are confidential and may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document is intended for discussion only and shall not be capable of creating any contractual or other legal obligations on the part of AMEU or any other HSBC Group company. This document is based on information obtained from sources believed to be reliable but which have not been independently verified. AMEU and HSBC Group accept no responsibility as to its accuracy or completeness. Care has been taken to ensure the accuracy of this presentation but AMEU accepts no responsibility for any errors or omissions contained therein.

This document and any issues or disputes arising out of or in connection with it (whether such disputes are contractual or non-contractual in nature, such as claims in tort, for breach of statute or regulation or otherwise) shall be governed by and construed in accordance with English law.

Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. AMEU accepts no liability for any failure to meet such forecast, projection or target. 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. Any performance information shown refers to the past and should not be seen as an indication of future returns.

Recipients of this communication who intend to acquire an investment in a Fund are reminded that any such acquisition may only be made on the basis of the final form of the Offering Memorandum or Prospectus, fund legal documentation, and on satisfaction of the requirements of the applicable Subscription Document. It is the responsibility of prospective investors to satisfy themselves as to full compliance with the relevant laws and regulations of any territory in connection with any application to participate in the Fund.

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www.assetmanagement.hsbc.co.uk/en/intermediary/investment-expertise/sustainable-investments/sustainable-investment-product-offering

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