Importance of Due Diligence - HSBC · 2017. 3. 9. · assets include penny stocks and shares of...

For professional clients only

Importance of Due DiligenceFor Index Tracker Funds and ETFs

2

Index-based funds may differ from active funds in

the way they are managed, structured and traded

but products from different providers may, just

as with active funds, perform differently. In order

to incorporate high quality passive funds into

a portfolio, advisers need to have a robust due

diligence process for selecting index-based funds,

just as they do for active funds.

As awareness of problems such as the issuer’s

concentration risk becomes more prevalent, we

expect to see better due diligence used in the selection

of passive funds. Concentration risks relate to having

a high proportion of assets invested with a single

fund provider.

“ Fund selection based on strong risk assessment

and due diligence, rather than going for a ‘default

provider’, will ultimately lead to better outcomes

for end investors.”In this publication, we will cover some of the most

important questions that, in our view, intermediaries

and fund buyers should address as part of their due

diligence framework for passive fund selection.

Making the right choice

As part of passive fund selection, due diligence is

typically conducted in three stages. First, suitable

indices are identified, then a shortlist of index funds

tracking them is created, and finally the fund is selected

based on the choice of a provider.

The different considerations at each of these levels are

weighted depending on advisers’ views on the following

key factors.

Fund

Index

Provider

Due Diligence

Index coverage

Weighting methodology

Rebalancing

Liquidity

UCITS

Replication

CostTracking difference /

Tracking error

AUM

Independent ratings

Client centric

Risk management

AUM growth

IFA support

Focus on growth

Experience & brand

IND

EX

Index coverage

Each index has its own construction methodology

which determines which stocks are included from

their respective investment universe. Different index

providers covering the same market would not normally

have the same stock selection criteria. Some equity

index providers would exclude certain types of shares,

while others will not or classify sectors differently from

other providers. Some indices may exclude whole

countries from their scope, while other providers will

include them. The most commonly used index selection

criteria takes into account market capitalisation of the

underlying securities.

For example, FTSE and MSCI differ in the way they

classify emerging market countries (EMs), with South

Korea categorised as developed markets by FTSE but as

emerging markets by MSCI.

For instance, with the S&P 500 Index representing

about 80% of US market capitalisation1, a question

can be asked about what will be achieved by going

any broader than S&P 500?

Index weighting methodology

Different index weighting methodologies can lead to

differences in performance and risk-return characteristics

among seemingly similar indexes.

The S&P 500 Index is an example of the most

commonly used index methodology, which is based

on market capitalisation.

There are other index weighting methodologies

and it is important to understand what this

means in the context of your overall

investment objectives.

1 Source: Standard & Poor’s, November 2016

Capped exposure

Some markets are dominated by a few large companies

and, as a result, the market cap indices that track

these markets may have significant exposure to these

companies. Some providers may opt for a ‘capped’

version of these indices, which limit the percentage

exposure to their largest constituents. This allows the

provider to offer a more diversified exposure to these

markets. HSBC Global Asset Management has opted

for this type of index exposure for both the HSBC MSCI

Russia Capped UCITS ETF and the HSBC MSCI Mexico

Capped UCITS ETF.

3

Select an Index

“ Understanding an index’s focus and construction allows you to pinpoint the exact exposure you need for a client’s portfolio.”

Due Diligence

4

Index re-balancing: how often?

The composition of indices is reviewed periodically

to ensure that they remain representative of the their

objectives. For example, some stocks are dropped from

a market capitalisation index in the course of rebalancing

if their size falls bellow or rises above the respective

threshold of this index.

The frequency of index rebalancing is part of an index’s

calculation methodology. The more frequently an index

rebalances and the larger the resulting underlying

movements are, the higher the turnover rate is for that

particular index. If an index has a high turnover rate,

any fund aiming to track the performance of that index

will be faced with higher trading costs. As trading costs

come out of fund performance, fund returns will be

negatively impacted.

Liquidity of the underlying market

As part of their index construction process, providers

often apply a filter to exclude stocks with low liquidity

however it is still important for investors to consider

liquidity when selecting an index.

When selecting a passive fund, investors should

consider the level of liquidity (availability) of the

underlying index’s constituent securities.

At the most liquid end of the spectrum are listed

shares of large global companies, while highly illiquid

assets include penny stocks and shares of very small

companies that are traded “by appointment”.

Liquidity can fall due to market conditions or stock-specific

factors, creating a risk for investors. That risk can impact

an asset’s price.

5

FUN

D

5

A Fund ShortlistIs it a UCITS fund?

Most retail funds in Europe are UCITS compliant. UCITS

was enacted to create a single European standard for

consumer protection in respect to fund composition.

In Europe, but also in regions beyond its borders, it is

considered a quality seal, as it sets very high common

standards that are embedded in the European regulatory

framework. Therefore, it makes good sense to select

index-based funds that are UCITS compliant.

Physical or Synthetic Replication?

The most straight-forward way to replicate an index

is physical replication. In this instance, an index fund

manager purchases the underlying securities of an index.

An alternative to this is synthetic replication, whereby

a fund manager instead buys a swap from a third party.

A swap is a derivative security providing the return from

a given index in exchange for a fee and any returns

on collateral.

Overall cost

When it comes to comparing fund costs, it is

increasingly based on passive funds’ Total Cost of

Ownership (TCO). This way, a comparison takes into

account not only management fees and the Ongoing

Charges Figure (OCF), but also transaction costs.

The total cost of ownership comprises:

u Costs of holding the fund – (which effectively are

reflected by the fund’s tracking difference) consist of

the OCF and the costs incurred within the fund, such

as rebalancing costs, taxes, dividend reinvestment/

cash drag and any costs associated with the

optimisation, if applicable.

u Costs of trading the fund – where applicable, include

platform or brokerage transaction fees and taxes.

“ There are concerns that the risks associated with synthetic funds – the most important of which is counterparty risk – can make them a less attractive investment option. It means that investors may not be compensated for this type of risk.” “ The TCO shows that investing

attracts a number of expenses not included in the headline price (OCF).”

Therefore, we believe that when looking at fund costs,

cost comparisons should be based on the TCO. For

index-based funds, the TCO comprises the tracking

difference, which signifies the sum of all costs and

income within the fund, and trading costs.

AUM?

Tracking Difference?

FundRating?

££££Cost?

FUND

INDEX

Assets under management (AUM)

Index-based funds attract different volumes of investor

assets, which may be partly due to the nature of the

underlying indices they track. Significant assets illustrate

investor interest in an index-based fund, but also its

underlying market. Moreover, index-based funds that

track more specialised markets (such as an emerging

market country index) tend to have a lower AUM than a

large developed country, regional or a global stock index.

This is because of the size of the underlying market and

demand. Moreover, new funds may be smaller in size but

at the same time offer a better solution than some of its

larger peers.

Securities lending

Many fund providers use stock lending which helps

to reduce fund costs by lending some of the portfolio

holdings to a third party for a fee. However, this carries

counterparty risk, as the stock may be lost if the

borrower goes out of business.

Some providers indemnify their investors against

this risk while others don’t, so a review of stock

lending practices should form an important part of any

due diligence process. If a fund is involved in stock

lending then due diligence should also address that

point in detail. Questions should be asked about the

type of collateral that is being offered and the over

collateralisation applied. What is the state of financial

security under any stress testing? Moreover, securities

lending adds an extra layer of complexity to the fund’s

investment process and costs. It can also be useful to

look at how the fund provider profits from securities

lending alongside the fund and consider how this may

effect their securities lending policies.

Tracking difference and tracking error

Passive funds’ dealing and trading fees mean that

they never mimic their index exactly. Two measures

used to gauge this discrepancy in returns are ‘tracking

difference’ and ‘tracking error’. These measures should

be considered together as tracking difference looks at

how well an index is replicated over a given period of

time, while tracking error, being a measure of volatility,

gives an idea how consistent that replication is.

Tracking difference compares the fund’s return

to the performance of its underlying index over

a period of time. For example, if an index tracker

delivered 8.5% over a period of time compared to

the underlying index’s 10% over the same period,

the tracking difference in this instance will be -1.5%.

Tracking error is a measurement of risk that defines

how consistent the return difference between

the fund and its benchmark index has been over

time. It is calculated as the annualised standard

deviation of the difference between the fund’s daily

performance and that of its underlying index.

It should be remembered that all measures of tracking

quality are backward looking and as such can’t be relied

on to forecast future performance.

Different pricing points

When comparing tracking errors of different funds,

investors should bear in mind that different providers

may price their index funds at different times of the

day. It means that the figures may need to be adjusted

before a fair comparison is made. More information can

be requested from the provider.6

AUM?

Tracking Difference?

FundRating?

££££Cost?

FUND

INDEX

7

“ The Global Financial Crisis brought about the realisation that stock lending carried some additional risks that might have been underestimated in the past and could result in additional losses.”

Independent Ratings

As with active funds, there are a number of independent

ratings agencies that assess passive funds’ relative

performance, together with the strength and quality of

their investment processes.

Independent ratings are designed to help investors

decide which funds have the greatest potential to deliver

the best performance. However, index-based funds are

8

still a relatively new area for ratings agencies and there

is still no common industry standard of how it should

be approached. Therefore, it is important to review the

rating methodology and data used to ensure that it

meets your expectations.

Please see our publication on index fund ratings.

Agency Name of Rating Types of funds rated Based on

Defaqto Diamond Rating Index trackers (OEICs and unit trusts)Combination of quantitative and qualitative factors

Dynamic Planner ACE Fund Rating Index trackers (OEICs and unit trusts)Combination of quantitative and qualitative factors

FE (Financial Express) Crown Rating Index trackers (OEICs and unit trusts) and ETFs Quantitative factors

Morningstar

‘Star’ rating Index trackers (OEICs and unit trusts) and ETFs Quantitative factors

Analyst Rating (Gold, Silver, Bronze, Neutral and Negative) Index trackers (OEICs and unit trusts) Qualitative factors

Rayner Spencer Mills RSMR Rating (Blue) Index trackers (OEICs and unit trusts) Combination of quantitative and qualitative factors

Independent ratings for passive funds

9

Putting clients first

It may be argued that, being quantitatively-driven

investment vehicles, passive funds are only as good as

the processes and technology on which they are built.

The Fund provider’s track record and reputation offer

an effective reflection of their capabilities, knowledge

and experience.

Any decision to invest in the Fund should take into

account the provider’s approach to conduct risk

and corporate governance.

Commitment on product development and growth

Does the asset manager operate in both ETFs and tracker

funds by the same team – demonstrating collaborative

expertise and commitment to index investing? Is the

provider continually developing its range?

Due diligence should also look at the strength of the

provider’s brand and its financial position. How have the

assets grown over the previous years? How does the

firm manage risk?

How does the asset manager support IFAs?

Ask yourself, how strong is the asset manager at

supporting their clients, such as providing thought

leadership, support and briefings for advisers?

Does the fund provider have a vision about its place in

the evolving industry and a long-term strategy for how

best to support their clients?

Having a clear vision and a voice helps underline

the provider’s commitment to index investment

products. This would mean that the provider takes

the necessary steps to ensure that it offers products

that answer investors’ requirements and are right for

market conditions.

PR

OV

IDE

R

9

Select a Provider

“ You need to question how client-centric your fund provider is. How much work is done to make investment solutions transparent and easy to understand for investors? Does the firm offer products tested with such organisations as the Wisdom Council, a consumer research agency? ”

Risk management

Asset managers must be judged on their ability not

only to monitor but also to control a range of risks that

may affect their passive funds’ ability to track indices

effectively. Risk management is a key consideration not

only during portfolio construction but throughout the life

of the fund.

Ongoing risk management includes the analysis of

performance attributions and exposures to different parts

of the underlying market. Asset managers also look at

the impact of index rebalancing, currency exchange rate

exposure and corporate actions, such as mergers and

acquisitions, stock splits, rights issues, spin-offs or the

receipt of interest and dividends.

Many fund providers use stock lending which helps

to reduce fund costs by lending some of the portfolio

holdings to a third party for a fee. However, as we argued

earlier, it carries some risk and some providers do not

indemnify against it.

Other important risk factors that asset managers always

need to take into consideration are regulation and tax

regimes, which may span many countries and continents

depending on the investment universe of a given fund.

Changes to tax and regulation may have an impact,

sometimes considerable, on the performance of the

underlying funds.

Experience and brand

The track record and reputation of the fund provider

offer an effective reflection of the asset manager’s

capabilities, knowledge and experience.

Impact of corporate actions

Index rebalancingimpact

Impact of indexrebalancing

Performance attributions analysis

Sector exposure analysis

Regulation and tax regimes

RiskManagement

10

11

Fund

Index

Provider

HSBC Index Tracker Fund RangeFund Name Benchmark Tracking Method Ongoing Charges

Figure (OCF)* Share Class ISIN Fund launch date

HSBC American Index Fund S&P 500 Index Full0.08 Inc GB00B80QG490

31/10/19880.08 Acc GB00B80QG615

HSBC European Index Fund FTSE Developed Europe ex UK Index Full0.10 Inc GB00B80QGD89

14/01/19890.10 Acc GB00B80QGH28

HSBC FTSE 100 Index Fund FTSE 100 Index Full0.18 Inc GB00B80QD042

30/09/19940.18 Acc GB00B80QFR50

HSBC FTSE 250 Index Fund FTSE 250 Index Full0.18 Inc GB00B80QFZ35

07/10/19970.18 Acc GB00B80QG052

HSBC FTSE All Share Index Fund FTSE All-Share Index Optimised0.07 Inc GB00B80QFW04

26/03/19900.07 Acc GB00B80QFX11

HSBC FTSE All-World Index Fund FTSE All-World Index Optimised0.20 Inc GB00BMJJJG09

26/09/20140.20 Acc GB00BMJJJF91

HSBC Index-Linked Gilt Index Fund FTSE Actuaries UK Index-Linked Gilts Index Full0.17 Inc GB00BYV9WL85

15/07/20160.17 Acc GB00BYVCCV79

HSBC Japan Index Fund FTSE Japan Index Full0.21 Inc GB00B80QGM70

14/01/19890.21 Acc GB00B80QGN87

HSBC Pacific Index Fund FTSE Asia Pacific Ex. Japan Index Full0.25 Inc GB00B80QGR26

20/11/19980.25 Acc GB00B80QGT40

HSBC Sterling Corporate Bond Index Fund Markit iBoxx GBP Non-Gilts Index Optimised0.17 Inc GB00BYV9W854

24/10/20160.17 Acc GB00BYV9WC94

HSBC UK Gilt Index Fund FTSE Actuaries UK Gilts All Stocks Index Full0.20 Inc GB00B80QG276

07/06/20100.20 Acc GB00B80QG383

Lower minimum investments will apply to business done via platforms. For direct business with HSBC Global Asset Management, a minimum of £1million applies.

12

Fund Name Benchmark Tracking Method Ongoing Charges Figure (OCF)* Share Class ISIN Fund

launch date

HSBC American Index Fund S&P 500 Index Full0.08 Inc GB00B80QG490

31/10/19880.08 Acc GB00B80QG615

HSBC European Index Fund FTSE Developed Europe ex UK Index Full0.10 Inc GB00B80QGD89

14/01/19890.10 Acc GB00B80QGH28

HSBC FTSE 100 Index Fund FTSE 100 Index Full0.18 Inc GB00B80QD042

30/09/19940.18 Acc GB00B80QFR50

HSBC FTSE 250 Index Fund FTSE 250 Index Full0.18 Inc GB00B80QFZ35

07/10/19970.18 Acc GB00B80QG052

HSBC FTSE All Share Index Fund FTSE All-Share Index Optimised0.07 Inc GB00B80QFW04

26/03/19900.07 Acc GB00B80QFX11

HSBC FTSE All-World Index Fund FTSE All-World Index Optimised0.20 Inc GB00BMJJJG09

26/09/20140.20 Acc GB00BMJJJF91

HSBC Index-Linked Gilt Index Fund FTSE Actuaries UK Index-Linked Gilts Index Full0.17 Inc GB00BYV9WL85

15/07/20160.17 Acc GB00BYVCCV79

HSBC Japan Index Fund FTSE Japan Index Full0.21 Inc GB00B80QGM70

14/01/19890.21 Acc GB00B80QGN87

HSBC Pacific Index Fund FTSE Asia Pacific Ex. Japan Index Full0.25 Inc GB00B80QGR26

20/11/19980.25 Acc GB00B80QGT40

HSBC Sterling Corporate Bond Index Fund Markit iBoxx GBP Non-Gilts Index Optimised0.17 Inc GB00BYV9W854

24/10/20160.17 Acc GB00BYV9WC94

HSBC UK Gilt Index Fund FTSE Actuaries UK Gilts All Stocks Index Full0.20 Inc GB00B80QG276

07/06/20100.20 Acc GB00B80QG383

Lower minimum investments will apply to business done via platforms. For direct business with HSBC Global Asset Management, a minimum of £1million applies. Initial Charge Domicile

0% UK

* C share class accumulation units. Please refer to the regulatory disclosures overleaf.

13

FUND NAME Stock Exchange

Bloomberg ticker

Reuters ticker

Base Currency1

Trading Currency2 OCF3 ISIN Sedol Dividends

UK Reporting Status4

Replication method UCITS IV Registration

DEVELOPED MARKETS – REGIONAL EXPOSURE

HSBC MSCI PACIFIC ex JAPAN UCITS ETF

LSE GBPLSE USDNYSE Euronext ParisSIX Swiss USDDeutsche Borse

HMXJ LNHMXD LNMXJ FPHMXJ SWH4ZH GY & GR

HMXJ.LHMXD.LMXJ.PAHMXJ.SH4ZH.DE

USD

GBPUSDEURUSDEUR

0.40%

IE00B5SG8Z57IE00B5SG8Z57IE00B5SG8Z57IE00B5SG8Z57DE000A1C22P6

B5SG8Z5B3Z8N00 B60XHD2B5P4324B4WHBL4

Semi-annual Yes Physical – Replication Compliant UK, FR, DE, IT, NL, ES,

SW, CH, IE, AT

HSBC MSCI EUROPE UCITS ETF

LSE GBPNYSE Euronext ParisSIX Swiss USDSIX Swiss EURDeutsche Borse

HMEU LNHEU FPHMEU SWHMEUEUR SWH4ZE GY & GR

HMEU.LHEU.PAHMEU.SHMEUS.SH4ZE.DE

EUR

GBPEURUSDEUREUR

0.20%

IE00B5BD5K76IE00B5BD5K76IE00B5BD5K76IE00B5BD5K76DE000A1C22L5

B5BD5K7B5MLFJ9B4V4L83 B3R48F6B4WZVJ6


SW, CH, IE

HSBC EURO STOXX 50 UCITS ETF


H50E LN50E FPH50E SWH50EEUR SWH4ZA GY & GR

H50E.L50E.PAH50E.SH50EE.SH4ZA.DE

EUR

GBPEURUSDEUREUR

0.05%

IE00B4K6B022IE00B4K6B022IE00B4K6B022IE00B4K6B022DE000A1C0BB7

B4K6B02B4KTPN2B4T2156 B3RNLN2B4WNQH3


SW, CH, IE, AT

HSBC MSCI WORLD UCITS ETF


HMWO LNHMWD LNWRD FPHMWO SWH4ZJ GY & GR

HMWO.LHMWD.LWRD.PAHMWO.SH4ZJ.DE

USD

GBPUSDEURUSDEUR

0.15%

IE00B4X9L533IE00B4X9L533IE00B4X9L533IE00B4X9L533DE000A1C9KL8

B5BD198B4X9L53B4YCZD7 B5W4MY2B4VBPV5

Quarterly YesPhysical – Optimisation Replication

Compliant UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

DEVELOPED MARKETS – SINGLE COUNTRY EXPOSURE

HSBC S&P 500 UCITS ETF


HSPX LNHSPD LNHHH FPHSPX SWH4ZF GY & GR

HSPX.LHSPD.LHHH.PAHSPX.SH4ZF.DE

USD

GBPUSDEURUSDEUR

0.09%

IE00B5KQNG97IE00B5KQNG97IE00B5KQNG97IE00B5KQNG97DE000A1C22M3

B5KQNG9 B64XYN7B5T03T5 B4Y3DG9 B54FQ74


SW, CH, IE, AT

HSBC FTSE 100 UCITS ETF

LSE GBPNYSE Euronext ParisSIX Swiss USDDeutsche Borse

HUKX LNUKX FPHUKX SWH4ZB GY & GR

HUKX.LUKX.PAHUKX.SH4ZB.DE

GBP

GBPEURUSDEUR

0.07%

IE00B42TW061IE00B42TW061IE00B42TW061DE000A1C0BC5

B42TW06B4NQM28B55B529 B51D2P1


SW, CH, IE

HSBC MSCI USA UCITS ETF


HMUS LNHMUD LNMUS FPHMUS SWH4ZD GY & GR

HMUS.LHMUD.LMUS.PAHMUS.SH4ZD.DE

USD

GBPUSDEURUSDEUR

0.30%

IE00B5WFQ436IE00B5WFQ436IE00B5WFQ436IE00B5WFQ436DE000A1C22K7

B5WFQ43 B3Z7TR6B57D976B5103K4 B4YRY80


SW, CH, IE, AT

HSBC MSCI JAPAN UCITS ETF

LSE GBPLSE USDNYSE Euronext ParisSIX Swiss USDSIX Swiss JPY Deutsche Borse

HMJP LNHMJD LNMJP FPHMJP SWHMJPJPY SW H4ZC GY & GR

HMJP.LHMJD.LMJP.PAHMJP.SHMJPJPY.S H4ZC.DE

USD

GBPUSDEURUSDJPY EUR

0.19%

IE00B5VX7566IE00B5VX7566IE00B5VX7566IE00B5VX7566IE00B5VX7566 DE000A1C0BD3

B5VX756B4V1TC4B5LRD94B50ZTJ1 B7J4WR2 B4VZP39


SW, CH, IE

HSBC FTSE 250 UCITS ETF LSE GBP HMCX LN HMCX.L GBP GBP 0.35% IE00B64PTF05 B64PTF0 Quarterly Yes Physical – Replication Compliant UK, FR, IE, NL, ES

HSBC Exchange Traded Fund (ETFs) Range

14


Bloomberg ticker

Reuters ticker

Base Currency1




DEVELOPED MARKETS – REGIONAL EXPOSURE

HSBC MSCI PACIFIC ex JAPAN UCITS ETF


HMXJ LNHMXD LNMXJ FPHMXJ SWH4ZH GY & GR

HMXJ.LHMXD.LMXJ.PAHMXJ.SH4ZH.DE

USD

GBPUSDEURUSDEUR

0.40%

IE00B5SG8Z57IE00B5SG8Z57IE00B5SG8Z57IE00B5SG8Z57DE000A1C22P6

B5SG8Z5B3Z8N00 B60XHD2B5P4324B4WHBL4


SW, CH, IE, AT

HSBC MSCI EUROPE UCITS ETF


HMEU LNHEU FPHMEU SWHMEUEUR SWH4ZE GY & GR

HMEU.LHEU.PAHMEU.SHMEUS.SH4ZE.DE

EUR

GBPEURUSDEUREUR

0.20%

IE00B5BD5K76IE00B5BD5K76IE00B5BD5K76IE00B5BD5K76DE000A1C22L5

B5BD5K7B5MLFJ9B4V4L83 B3R48F6B4WZVJ6


SW, CH, IE

HSBC EURO STOXX 50 UCITS ETF


H50E LN50E FPH50E SWH50EEUR SWH4ZA GY & GR

H50E.L50E.PAH50E.SH50EE.SH4ZA.DE

EUR

GBPEURUSDEUREUR

0.05%

IE00B4K6B022IE00B4K6B022IE00B4K6B022IE00B4K6B022DE000A1C0BB7

B4K6B02B4KTPN2B4T2156 B3RNLN2B4WNQH3


SW, CH, IE, AT

HSBC MSCI WORLD UCITS ETF


HMWO LNHMWD LNWRD FPHMWO SWH4ZJ GY & GR

HMWO.LHMWD.LWRD.PAHMWO.SH4ZJ.DE

USD

GBPUSDEURUSDEUR

0.15%

IE00B4X9L533IE00B4X9L533IE00B4X9L533IE00B4X9L533DE000A1C9KL8

B5BD198B4X9L53B4YCZD7 B5W4MY2B4VBPV5


Compliant UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

DEVELOPED MARKETS – SINGLE COUNTRY EXPOSURE

HSBC S&P 500 UCITS ETF


HSPX LNHSPD LNHHH FPHSPX SWH4ZF GY & GR

HSPX.LHSPD.LHHH.PAHSPX.SH4ZF.DE

USD

GBPUSDEURUSDEUR

0.09%

IE00B5KQNG97IE00B5KQNG97IE00B5KQNG97IE00B5KQNG97DE000A1C22M3

B5KQNG9 B64XYN7B5T03T5 B4Y3DG9 B54FQ74


SW, CH, IE, AT

HSBC FTSE 100 UCITS ETF

LSE GBPNYSE Euronext ParisSIX Swiss USDDeutsche Borse

HUKX LNUKX FPHUKX SWH4ZB GY & GR

HUKX.LUKX.PAHUKX.SH4ZB.DE

GBP

GBPEURUSDEUR

0.07%

IE00B42TW061IE00B42TW061IE00B42TW061DE000A1C0BC5

B42TW06B4NQM28B55B529 B51D2P1


SW, CH, IE

HSBC MSCI USA UCITS ETF


HMUS LNHMUD LNMUS FPHMUS SWH4ZD GY & GR

HMUS.LHMUD.LMUS.PAHMUS.SH4ZD.DE

USD

GBPUSDEURUSDEUR

0.30%

IE00B5WFQ436IE00B5WFQ436IE00B5WFQ436IE00B5WFQ436DE000A1C22K7

B5WFQ43 B3Z7TR6B57D976B5103K4 B4YRY80


SW, CH, IE, AT

HSBC MSCI JAPAN UCITS ETF

LSE GBPLSE USDNYSE Euronext ParisSIX Swiss USDSIX Swiss JPY Deutsche Borse

HMJP LNHMJD LNMJP FPHMJP SWHMJPJPY SW H4ZC GY & GR

HMJP.LHMJD.LMJP.PAHMJP.SHMJPJPY.S H4ZC.DE

USD

GBPUSDEURUSDJPY EUR

0.19%

IE00B5VX7566IE00B5VX7566IE00B5VX7566IE00B5VX7566IE00B5VX7566 DE000A1C0BD3

B5VX756B4V1TC4B5LRD94B50ZTJ1 B7J4WR2 B4VZP39


SW, CH, IE

HSBC FTSE 250 UCITS ETF LSE GBP HMCX LN HMCX.L GBP GBP 0.35% IE00B64PTF05 B64PTF0 Quarterly Yes Physical – Replication Compliant UK, FR, IE, NL, ES

HSBC Exchange Traded Fund (ETFs) Range

15


Bloomberg ticker

Reuters ticker

Base Currency1




HSBC MSCI CANADA UCITS ETF

LSE GBPLSE USDNYSE Euronext ParisSIX Swiss CAD SIX Swiss USDDeutsche Borse

HCAN LNHCAD LNHCAN FPHCANCAD SW HCAN SWH4ZR GY & GR

HCAN.LHCAD.LHCAN.PAHCANCAD.S HCAN.SH4ZR.DE

USD

GBPUSDEURCAD USDEUR

0.35%

IE00B51B7Z02IE00B51B7Z02IE00B51B7Z02IE00B51B7Z02 IE00B51B7Z02DE000A1JF7N6

B57JD27B51B7Z0 B4X4T87B5M79V7 B592VC0B4XWHP4


SW, CH, IE

DEVELOPED MARKETS – PROPERTY

HSBC FTSE EPRA/NAREIT DEVELOPED UCITS ETF LSE GBPLSE USDDeutsche Borse

HPRO LNHPRD LNH4ZL GY & GR

HPROP.LHPRD.LH4ZL.DE

USDGBPUSDEUR

0.40%IE00B5L01S80IE00B5L01S80DE000A1JXC78

B5L01S8 B3LFHB4BDC7PY8

Quarterly Yes Physical – Replication Compliant

UK, FR, DE, IT, NL, ES, SW, IE

EMERGING MARKETS – REGIONAL EXPOSURE

HSBC MSCI EMERGING MARKETS UCITS ETF

LSE GBPLSE USDSIX Swiss USDDeutsche Borse

HMEF LNHMEM LNHMEF SWH410 GY & GR

HMEF.L HMEM.L HMEF.SH410.DE

USD

GBPUSDUSDEUR

0.40%

IE00B5SSQT16IE00B5SSQT16IE00B5SSQT16DE000A1JXC94

B5ZPRQ9 B5SSQT1 B5L27B9BDC7Q23


Compliant UK, FR, DE, IT, NL, ES, SW, IE, CH, AT





USD

GBPUSDUSDEUR

0.40%





HSBC MSCI EM FAR EAST UCITS ETF


HMFE LNHMFD LNMEM FPHMFE SWH4ZI GY & GR

HMFE.LHMFD.LMEM.PAHMFE.SH4ZI.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5LP3W10IE00B5LP3W10IE00B5LP3W10IE00B5LP3W10DE000A1C22Q4

B5LP3W1B3XMR13 B5KTC94B59MNV3 B4TB4Y3

Semi-annual YesPhysical – Optimisation Replication

Compliant UK, FR, DE, IT, NL, ES, SW, CH, IE

HSBC MSCI EM LATIN AMERICA UCITS ETF


HMLA LNHMLD LNHMLA FPHMLA SWH4ZW GY & GR

HMLA.LHMLD.LHMLA.PAHMLA.SH4ZW.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B4TS3815IE00B4TS3815IE00B4TS3815IE00B4TS3815DE000A1JF7T3

B56T0F0B4TS381B4T3SB4B4RDC58B4PJFC6

Quarterly Yes Physical – Replication Compliant UK, FR, DE, IT, NL, ES,

SW, CH, IE

HSBC MSCI AC FAR EAST EX JAPAN UCITS ETF

LSE GBP LSE USD Deutsche BorseSIX Swiss USD

HMAF LN HMAD LN H411 GY & GRHMAF SW

HMAF.L HMAD.L H411.DEHMAF.S

USD

GBP USD EUR USD

0.60%

IE00BBQ2W338 IE00BBQ2W338 DE000A1W2EK4IE00BBQ2W338

BBR6WH8 BBQ2W33 BDC7Q34BKRC9F6

Accumulated YesPhysical – Optimisation Replication

Compliant UK, FR, DE, IT, NL, SW, CH, IE, AT

EMERGING MARKETS – SINGLE COUNTRY EXPOSURE

HSBC MSCI RUSSIA CAPPED UCITS ETF


HRUB LNHRUD LNHRUB SWH4ZM GY & GR

HRUB.LHRUD.LHRUB.SH4ZM.DE

USD

GBPUSDUSDEUR

0.60%

IE00B5LJZQ16IE00B5LJZQ16IE00B5LJZQ16DE000A1JXC86

B62NTH8B5LJZQ1 B60XPB6BDC7Q12


SW, CH, IE, AT

HSBC MSCI CHINA UCITS ETF


HMCH LNHMCD LNCNY FPHMCH SWH4ZP GY & GR

HMCH.LHMCD.LCNY.PAHMCH.SH4ZP.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B44T3H88IE00B44T3H88IE00B44T3H88IE00B44T3H88DE000A1JF7LO

B44T3H8B40S3X5 B4KRT78B3T97G3B3T3XS9


SW, CH, IE

HSBC MSCI TAIWAN UCITS ETF


HTWN LNHTWD LNHTWN SWH4ZU GY & GR

HTNT.LHTWD.LHTWN.SH4ZU.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3S1J086IE00B3S1J086IE00B3S1J086DE000A1JF7R7

B430TV8B3S1J08B3SLK27B44JV85

Semi-annual Yes Physical – Replication) Compliant UK, FR, DE, IT, NL, ES,

SW, CH, IE

16


Bloomberg ticker

Reuters ticker

Base Currency1




HSBC MSCI CANADA UCITS ETF

LSE GBPLSE USDNYSE Euronext ParisSIX Swiss CAD SIX Swiss USDDeutsche Borse

HCAN LNHCAD LNHCAN FPHCANCAD SW HCAN SWH4ZR GY & GR

HCAN.LHCAD.LHCAN.PAHCANCAD.S HCAN.SH4ZR.DE

USD

GBPUSDEURCAD USDEUR

0.35%

IE00B51B7Z02IE00B51B7Z02IE00B51B7Z02IE00B51B7Z02 IE00B51B7Z02DE000A1JF7N6

B57JD27B51B7Z0 B4X4T87B5M79V7 B592VC0B4XWHP4


SW, CH, IE

DEVELOPED MARKETS – PROPERTY

HSBC FTSE EPRA/NAREIT DEVELOPED UCITS ETF LSE GBPLSE USDDeutsche Borse

HPRO LNHPRD LNH4ZL GY & GR

HPROP.LHPRD.LH4ZL.DE

USDGBPUSDEUR

0.40%IE00B5L01S80IE00B5L01S80DE000A1JXC78

B5L01S8 B3LFHB4BDC7PY8

Quarterly Yes Physical – Replication Compliant

UK, FR, DE, IT, NL, ES, SW, IE

EMERGING MARKETS – REGIONAL EXPOSURE





USD

GBPUSDUSDEUR

0.40%









USD

GBPUSDUSDEUR

0.40%





HSBC MSCI EM FAR EAST UCITS ETF


HMFE LNHMFD LNMEM FPHMFE SWH4ZI GY & GR

HMFE.LHMFD.LMEM.PAHMFE.SH4ZI.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5LP3W10IE00B5LP3W10IE00B5LP3W10IE00B5LP3W10DE000A1C22Q4

B5LP3W1B3XMR13 B5KTC94B59MNV3 B4TB4Y3

Semi-annual YesPhysical – Optimisation Replication

Compliant UK, FR, DE, IT, NL, ES, SW, CH, IE

HSBC MSCI EM LATIN AMERICA UCITS ETF


HMLA LNHMLD LNHMLA FPHMLA SWH4ZW GY & GR

HMLA.LHMLD.LHMLA.PAHMLA.SH4ZW.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B4TS3815IE00B4TS3815IE00B4TS3815IE00B4TS3815DE000A1JF7T3

B56T0F0B4TS381B4T3SB4B4RDC58B4PJFC6

Quarterly Yes Physical – Replication Compliant UK, FR, DE, IT, NL, ES,

SW, CH, IE

HSBC MSCI AC FAR EAST EX JAPAN UCITS ETF

LSE GBP LSE USD Deutsche BorseSIX Swiss USD

HMAF LN HMAD LN H411 GY & GRHMAF SW

HMAF.L HMAD.L H411.DEHMAF.S

USD

GBP USD EUR USD

0.60%

IE00BBQ2W338 IE00BBQ2W338 DE000A1W2EK4IE00BBQ2W338

BBR6WH8 BBQ2W33 BDC7Q34BKRC9F6

Accumulated YesPhysical – Optimisation Replication

Compliant UK, FR, DE, IT, NL, SW, CH, IE, AT

EMERGING MARKETS – SINGLE COUNTRY EXPOSURE

HSBC MSCI RUSSIA CAPPED UCITS ETF


HRUB LNHRUD LNHRUB SWH4ZM GY & GR

HRUB.LHRUD.LHRUB.SH4ZM.DE

USD

GBPUSDUSDEUR

0.60%

IE00B5LJZQ16IE00B5LJZQ16IE00B5LJZQ16DE000A1JXC86

B62NTH8B5LJZQ1 B60XPB6BDC7Q12


SW, CH, IE, AT

HSBC MSCI CHINA UCITS ETF


HMCH LNHMCD LNCNY FPHMCH SWH4ZP GY & GR

HMCH.LHMCD.LCNY.PAHMCH.SH4ZP.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B44T3H88IE00B44T3H88IE00B44T3H88IE00B44T3H88DE000A1JF7LO

B44T3H8B40S3X5 B4KRT78B3T97G3B3T3XS9


SW, CH, IE

HSBC MSCI TAIWAN UCITS ETF


HTWN LNHTWD LNHTWN SWH4ZU GY & GR

HTNT.LHTWD.LHTWN.SH4ZU.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3S1J086IE00B3S1J086IE00B3S1J086DE000A1JF7R7

B430TV8B3S1J08B3SLK27B44JV85

Semi-annual Yes Physical – Replication) Compliant UK, FR, DE, IT, NL, ES,

SW, CH, IE

17


Bloomberg ticker

Reuters ticker

Base Currency1




HSBC MSCI MALAYSIA UCITS ETF


HMYR LNHMYD LNHMYR SWH4ZV GY & GR

HMYRM.LHMYD.LHMYR.SH4ZV.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3X3R831IE00B3X3R831IE00B3X3R831DE000A1JF7S5

B4885P3B3X3R83B3RSM78B3SR8W1


SW, CH, IE

HSBC MSCI INDONESIA UCITS ETF


HIDR LNHIDD LNHIDR SWH4ZT GY & GR

HIDRI.LHIDD.LHIDR.SH4ZT.DE

USD

GBPUSDUSDEUR

0.60%

IE00B46G8275IE00B46G8275IE00B46G8275DE000A1JF7Q9

B40Y0X2B46G827B3X4ZQ0B3V0C58


SW, CH, IE

HSBC MSCI KOREA UCITS ETF


HKOR LNHKOD LNHKOR SWH4Z9 GY & GR

HKOR.LHKOD.LHKOR.SH4Z9.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3Z0X395IE00B3Z0X395IE00B3Z0X395DE000A1JXC60

B3QHF77B3Z0X39B3SSPB2 BDC7PX7


SW, CH, IE

HSBC MSCI BRAZIL UCITS ETF


HBRL LNHMBR LNHBZ FPHBRL SWH4ZG GY & GR

HBRL.LHMBR.LHBZ.PAHBRL.SH4ZG.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5W34K94IE00B5W34K94IE00B5W34K94IE00B5W34K94DE000A1C22N1

B431M67B5W34K9B5MSL81B5NNMW6B4YBZ89


SW, CH, IE

HSBC MSCI MEXICO CAPPED UCITS ETF


HMEX LNHMED LNHMEX SWH4ZS GY & GR

HMEX.LHMEDC.LHMEX.SH4ZS.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3QMYK80IE00B3QMYK80IE00B3QMYK80DE000A1JF7P1

B3VQZM4B3QMYK8 B3T7V76B444WR6


SW, CH, IE

HSBC MSCI SOUTH AFRICA UCITS ETF


HZAR LNHZAD LNHZAR FPHZAR SWH4ZQ GY & GR

HZAR.LHZAD.LHZAR.PAHZAR.SH4ZQ.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B57S5Q22IE00B57S5Q22IE00B57S5Q22IE00B57S5Q22DE000A1JF7M8

B4WN004B57S5Q2B5WJDW2B3QH9F3B3XV3W3


SW, CH, IE

HSBC MSCI TURKEY UCITS ETF


HTRY LNHTRD LNHTR FPHTRY SWH4ZK GY & GR

HTRY.LHTRD.LHTR.PAHTRY.SH4ZK.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5BRQB73IE00B5BRQB73IE00B5BRQB73IE00B5BRQB73DE000A1H49V6

B57QMP4B5BRQB7B50S183B5BCP15B5V7Y02


SW, CH, IE

GLOBAL MARKETS – BROAD EXPOSURE

HSBC ESI WORLDWIDE EQUITY UCITS ETFLSE GBPLSE USD

HEWA LNHEWD LN

HEWA.L HEWD.L USD GBP

USD 0.25% IE00BKZG9Y92IE00BKZG9Y92

BKZG9Z0 BKZG9Y9 Quarterly Yes Replication Compliant UK

HSBC WORLDWIDE EQUITY UCITS ETFLSE GBPLSE USD

HWWA LNHWWD LN

HWWA.LHWWD.L USD GBP

USD 0.25% IE00BKZGB098IE00BKZGB098

BKZGB10BKZGB09 Quarterly Yes Optimisation Compliant UK

1. The currency in which the ETF is valued and the dividends are published. 2. The currency in which the ETF is traded in the relevant exchange. 3. Ongoing Charges Figure. 4. HSBC FTSE 100 UCITS ETF and the HSBC EURO STOXX 50 UCITS ETF had UK distributor status for the period from their launch until 31 December 2009. After this UK Reporting Fund status came into effect. All of our ETFs now have UK Reporting Fund status from 1 January 2010 or from the date of their launch if later.

18


Bloomberg ticker

Reuters ticker

Base Currency1




HSBC MSCI MALAYSIA UCITS ETF


HMYR LNHMYD LNHMYR SWH4ZV GY & GR

HMYRM.LHMYD.LHMYR.SH4ZV.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3X3R831IE00B3X3R831IE00B3X3R831DE000A1JF7S5

B4885P3B3X3R83B3RSM78B3SR8W1


SW, CH, IE

HSBC MSCI INDONESIA UCITS ETF


HIDR LNHIDD LNHIDR SWH4ZT GY & GR

HIDRI.LHIDD.LHIDR.SH4ZT.DE

USD

GBPUSDUSDEUR

0.60%

IE00B46G8275IE00B46G8275IE00B46G8275DE000A1JF7Q9

B40Y0X2B46G827B3X4ZQ0B3V0C58


SW, CH, IE

HSBC MSCI KOREA UCITS ETF


HKOR LNHKOD LNHKOR SWH4Z9 GY & GR

HKOR.LHKOD.LHKOR.SH4Z9.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3Z0X395IE00B3Z0X395IE00B3Z0X395DE000A1JXC60

B3QHF77B3Z0X39B3SSPB2 BDC7PX7


SW, CH, IE

HSBC MSCI BRAZIL UCITS ETF


HBRL LNHMBR LNHBZ FPHBRL SWH4ZG GY & GR

HBRL.LHMBR.LHBZ.PAHBRL.SH4ZG.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5W34K94IE00B5W34K94IE00B5W34K94IE00B5W34K94DE000A1C22N1

B431M67B5W34K9B5MSL81B5NNMW6B4YBZ89


SW, CH, IE

HSBC MSCI MEXICO CAPPED UCITS ETF


HMEX LNHMED LNHMEX SWH4ZS GY & GR

HMEX.LHMEDC.LHMEX.SH4ZS.DE

USD

GBPUSDUSDEUR

0.60%

IE00B3QMYK80IE00B3QMYK80IE00B3QMYK80DE000A1JF7P1

B3VQZM4B3QMYK8 B3T7V76B444WR6


SW, CH, IE

HSBC MSCI SOUTH AFRICA UCITS ETF


HZAR LNHZAD LNHZAR FPHZAR SWH4ZQ GY & GR

HZAR.LHZAD.LHZAR.PAHZAR.SH4ZQ.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B57S5Q22IE00B57S5Q22IE00B57S5Q22IE00B57S5Q22DE000A1JF7M8

B4WN004B57S5Q2B5WJDW2B3QH9F3B3XV3W3


SW, CH, IE

HSBC MSCI TURKEY UCITS ETF


HTRY LNHTRD LNHTR FPHTRY SWH4ZK GY & GR

HTRY.LHTRD.LHTR.PAHTRY.SH4ZK.DE

USD

GBPUSDEURUSDEUR

0.60%

IE00B5BRQB73IE00B5BRQB73IE00B5BRQB73IE00B5BRQB73DE000A1H49V6

B57QMP4B5BRQB7B50S183B5BCP15B5V7Y02


SW, CH, IE

GLOBAL MARKETS – BROAD EXPOSURE

HSBC ESI WORLDWIDE EQUITY UCITS ETFLSE GBPLSE USD

HEWA LNHEWD LN

HEWA.L HEWD.L USD GBP

USD 0.25% IE00BKZG9Y92IE00BKZG9Y92

BKZG9Z0 BKZG9Y9 Quarterly Yes Replication Compliant UK

HSBC WORLDWIDE EQUITY UCITS ETFLSE GBPLSE USD

HWWA LNHWWD LN

HWWA.LHWWD.L USD GBP

USD 0.25% IE00BKZGB098IE00BKZGB098

BKZGB10BKZGB09 Quarterly Yes Optimisation Compliant UK

1. The currency in which the ETF is valued and the dividends are published. 2. The currency in which the ETF is traded in the relevant exchange. 3. Ongoing Charges Figure. 4. HSBC FTSE 100 UCITS ETF and the HSBC EURO STOXX 50 UCITS ETF had UK distributor status for the period from their launch until 31 December 2009. After this UK Reporting Fund status came into effect. All of our ETFs now have UK Reporting Fund status from 1 January 2010 or from the date of their launch if later.

19

ContactFor more information, please contact us:

Email: [email protected]

Telephone: +44 (0) 207 024 0435

Website: www.assetmanagement.hsbc.com/passive

Important Information

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

The material contained herein is for information only and does not constitute investment advice or a recommendation to any reader of

this material to buy or sell investments.

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.

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. HSBC Global Asset Management (UK) Limited 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. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to

fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some

established markets. Stock market investments should be viewed as a medium to long term investment and should be held for at least

five years. Any performance information shown refers to the past and should not be seen as an indication of future returns. Some of

the ETFs invest predominantly in one geographic area; therefore any decline in the economy of this area may affect the prices and

value of the underlying assets.

To help improve our service and in the interests of security we may record and/or monitor your communication with us. HSBC Global

Asset Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment

products and services of the HSBC Group.

Approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the Financial

Conduct Authority. Copyright © HSBC Global Asset Management (UK) Limited 2017. All rights reserved.

HSBC Index Tracker Investment Funds is an Open Ended Investment Company that is authorised in the UK by the Financial Conduct

Authority. The Authorised Corporate Director and Investment Manager is HSBC Global Asset Management (UK) Limited. All

applications are made on the basis of the HSBC Index Tracker Investment Funds prospectus, Key Investor Information Document (KIID),

Supplementary Information Document (SID) and most recent annual and semi annual report, which can be obtained upon request

free of charge from HSBC Global Asset Management (UK) Limited, 8, Canada Square, Canary Wharf, London, E14 5HQ, UK, or the

local distributors. Investors and potential investors should read and note the risk warnings in the prospectus and relevant KIID and

additionally, in the case of retail clients, the information contained in the supporting SID.

16WS0009/0616/FP17-2078. Expiry 21/11/2017

Importance of Due Diligence - HSBC · 2017. 3. 9. · assets include penny stocks and shares of...

Documents

Transcript of Importance of Due Diligence - HSBC · 2017. 3. 9. · assets include penny stocks and shares of...