Our Solutions
Exchange Traded Funds (ETFs)
For Professional Clients only
The value of an investment in the portfolios and any income from them can go down as well as up and as with any
investment you may not receive back the amount originally invested.
2Exchange Traded Funds: Our Solutions
Our overall AUM (end of June 2018)
USD6.7bnOur range of 27 ETFs enables our clients to access developed and emerging
equity markets at global, regional and country levels. We are recognised as
experts in emerging markets, underpinned by our footprint, our local market
knowledge and access through out global network. This has allowed us to
develop a successful broad emerging market ETF range to sit along side our
developed market products. This combined offering allows investors to access
global equity markets and manage global investment portfolios.
Our ETFs
In October 2017, we launched our first active systematic strategies. These ETFs will take
advantage of our long track record in smart beta and fundamentally weighted strategies, a
well resourced research team of 20 investment professionals, supported by technology
infrastructure and experienced ETF portfolio managers. Both ETFs offer diversification from
passive and active strategies, and cost efficient access to ‘smart beta’ solutions.
HSBC Multi Factor Worldwide Equity UCITS ETF: The strategy uses a proprietary multi
factor investment model which aims to provide consistent outperformance against a market
capitalisation weighted index over the medium to long term through exposures to a suite of
diversified factor-based risk premia.
HSBC Economic Scale Worldwide Equity UCITS ETF: The strategy uses a systematic
investment approach and invests in companies according to their ‘economic scale’. The
chosen measure for economic scale is a company’s contribution to Gross National Product,
often referred to as ‘value added’.
HSBC active systematic ETFs
At the heart of our investment process is delivering close tracking error and managing tracking error budgets, while minimising the funds
execution costs. We have a proven track record in providing competitively priced market access solutions; supported by our dedicated
portfolio management teams, our investment in the latest trading technology and a dedicated global equity dealing team.
Cost efficiency in practice
Source: Bloomberg, HSBC Global Asset Management as at end of June 2018.
1. Market average has been computed by looking at the TER of the main Europe-domiciled ETFs tracking the same benchmark.
TER / OCF (%) Market average1
Euro Stoxx 50
HSBC Euro Stoxx 50 UCITS ETF 0.05 0.11
MSCI Japan
HSBC MSCI Japan UCITS ETF 0.19 0.33
S&P 500
HSBC S&P 500 UCITS ETF 0.09 0.12
MSCI World
HSBC MSCI World UCITS ETF 0.15 0.28
MSCI Emerging Markets
HSBC MSCI Emerging Markets UCITS ETF 0.40 0.39
Transparent
Tracking
Cost efficient
3Exchange Traded Funds: Our Solutions
ETF/ETP assets by region listed
Source: ETFGI as at end of December 2017.
6586
117
2,130 2,4053,423
506 562
802
136158
276
117 126170
502015 2016 2017
US
Db
n
Canada USA Europe Japan Asia ex Japan
Benefits of HSBC ETFs
USD650bnYTD December 2017-
net inflows globally
ETF AUM growth 2017
36.3%
DiversificationBenefits of broad exposure
within an asset class or
category.
TransparencyThe basket of underlying
securities (“PCF”) is
published every day.
Cost effectiveRelatively low costs and
transparent annual
management fees.
LiquidityETF liquidity comes from the
underlying securities and is
enhanced by secondary
markets.
PrecisionTarget exposure to asset
classes, investment style or
sector.
Controlled riskPhysical replication
minimizes risk.
No minimum
investmentETFs can be bought and
sold in 1 share.
Accurate
trackingRobust quantitative portfolio
management, trading and
risk monitoring ensure
efficiency.
4Exchange Traded Funds: Our Solutions
1. As at end of June 2018.
Source: HSBC Global Asset Management. For illustrative purposes only.
We have successfully managed index funds for external clients since
1988, with dedicated portfolio management teams across global
markets, leveraging our infrastructure and expertise. We currently
manage USD43 billion1 in passive and systematic strategies. Our
ETF solutions are built on our strong index tracking heritage,
integrated platform and disciplined process.
We take a pragmatic approach to managing ETFs with two equally
important objectives: close tracking and minimising costs.
We offer equity market exposure to a range of global markets. We
carefully select indices where we can manage trading costs and
liquidity.
Our tracking method and value-added approach to managing passive
funds have enabled us to consistently produce returns that closely
mirror the index within target tracking tolerances.
Through considered implementation, we aim to find the optimal
trade-off between temporary tracking error and transaction costs,
when trading at large rebalance points, such as an index
reconstitution or a portfolio model review. The optimal balance and
duration of implementation is important in achieving this objective
and ultimately improves portfolio performance over time. Our
research has shown this approach adds, net of transaction costs, to
the performance of passive portfolios and is driven as a function of
the size of the opportunity set available, i.e. frequency of rebalances
and number of index changes. The diversification of implementation
is based on the detailed analysis of trade characteristics such as
liquidity, demand and supply profiles, volume multiple indicators,
price movements over short periods, expected market impact, and
portfolio risk.
Partnership in index and systematic equity
30+ years
experience managing
passive and systematic
equity portfolios
The strength of HSBC’s capabilities
Competitive
execution
costs
Strong
relationship
with the
administrator
Dedicated
global equity
dealing team
ESG and
munitions
stock
screening
01
02
03
04
05
06 Added
Value
Pre-trade analysis
Trading strategy
Investment team
reviewExecution
Continuousreview
Evolve strategy
07
Execution
HSBC added value
5Exchange Traded Funds: Our Solutions
Strong index tracking heritage
High tracking
accuracy
Dedicated
passive portfolio
management team
across all types of
index solutions
Large
investments
in the latest
trading
technology
Physical
Replication
1988 –
1998
Launched our first UK index
fund – American Index Fund.
1989 – FTSE All Share Index
Fund, HSBC European Index
Fund, and, HSBC Japan Index
Fund
1994 – HSBC FTSE 100 Index
Fund
1997/1998 – HSBC FTSE 250
Index Fund, and HSBC Pacific
Index Fund
Develo
pin
g p
roprie
tary te
chnolo
gy
Enhancem
ents
to o
ur p
rocess
30
Ye
ars
exp
erie
nce in
ind
ex a
nd
qu
an
titativ
e e
qu
ity m
an
agem
ent
INDEX & ACTIVE
SYSTEMATIC
Strategies
1st Multi Factor Institutional
mandate
2004
Global Equities (MSCI ACWI
based) strategy launched
UK Mutual funds launched – US,
UK and Japan country funds
2006
2009 - Listed our first ETFs on
the LSE.
Launched 24 ETFs across
developed and emerging
markets.
2010 – cross listed our ETFs
across France, Germany and
Switzerland
2009 –
20
11
Launch of our Fundamentally
Weighted Strategies: Economic
Scale Equity
2012
Launch of UCITS Common
Contractual Funds, based on
our Economic Scale Equity
Strategies – offering tax
efficient, transparent cross
border pooling
2015
Launch Multi Factor strategies-
Income, HGIF Global Lower
Carbon Equity
Launched two new Active ETFs
– following our proprietary
Active Systematic strategies
2017
Launch of our new ICAV
platform in Ireland to promote
our passive funds cross border.
2018
Launch of proprietary
quantitative tools.
2011
Establishment of
Systematic Research
team within HSBC Global
Asset Management.
Developing our active
systematic model
portfolios and building
research and insights
leveraged by our equity
portfolio managers
2000
Development of our
industry leading Visuliser
platform, a proprietary
portfolio modelling,
construction and risk
analytics system –
integrated across our
global network
2012
Launch of HSBC’s
proprietary portfolio and
stock investment decision
tool – TRAC – supporting
our passive investment
process to deliver
improved and scalable
execution
2015
Updates to our risk
modelling – creation of
proprietary tools and
resources
2015
Proprietary projection of
index changes by the
HSBC Index Funds Team
2016+
Use of trade optimisation
techniques that improve
risk / adjusted returns
focusing on the equity
market trading micro
structure, with access to
data and technology to
enhance the process and
fund risk adjusted returns
2015+
Portfo
lio / s
tock
managem
ent
Roll out and further
integration of PECMan,
the proprietary Cash
Management Investment
Decision Tool -
supporting our passive
investment process
2016
Cash m
anagem
ent
Portfo
lio m
odelin
g /
constru
ctio
nIn
dex p
roje
ctio
ns
Tra
din
g /
imple
menta
tion
Ris
k m
odellin
g
Core
researc
h te
am
Stra
tegy, p
ortfo
lio c
onstru
ctio
n a
nd
researc
h
6
Client requirements
Objectives
Constraints
Universe
Market
segment
Portfolio construction approach
Size of assets
Breadth of benchmark
Liquidity profile of stocks
Custody and admin costs
Index rebalance frequency Benchmark / Market
events monitoring
Corporate actions
Strategy weights
Free float and share
in issue changes
Dividend
management
Share offerings
Rights issues
Index activity / Rebalances
Rebalance / review
Timing and announcement
Frequency and overlap
Strategy
Analysis
Impact
Estimated cost / risk
Trade execution
Market access route
Method of execution
– electronic
Reporting
Risk trading
Exchange Traded Funds: Our Solutions
Source: HSBC Global Asset Management. For illustrative purposes only.
Our ETF investment process
Risk management
7Exchange Traded Funds: Our Solutions
At HSBC Global Asset Management we have heavily invested in
leading investment technology to support our investment process
and seize opportunities for our clients as they emerge. Our leading
proprietary technology ensures the efficiency and accuracy of
information- supporting consistent tracking and fund performance. At
HSBC our technological developments are integrated into our
investment platform, providing:
In-house proprietary algorithms and optimisation techniques,
Direct feeds of large pools of data,
Risk management coded and embedded across the platform at
both pre- and post-trade.
This is ever evident in the regards to managing our ETF range;
where the technology compliments the ability of our investment team
to bring cost savings and better performance outcomes for funds and
clients.
Investing in proprietary technology
Our ETFs benefit from our physical replication approach- where our portfolios are
invested in the constituents of the underlying index, and do not use synthetic
instruments, such as swaps sand other derivatives, to mirror index performance.
Some studies have shown that synthetic funds can offer a lower tracking error over
time than physically replicated funds. However, the risks associated with synthetic
index-based funds, most importantly counterparty risk, are often regarded as a less
attractive investment option.
In cases where buying all the underlying securities is not cost-effective, physical
funds can use an optimised method of portfolio construction and trade generation.
The optimisation method, purchases a representative proportion of securities in the
underlying index, which is highly correlated to owning the entire index. Optimisation
offers lower costs especially in regards to broad indices composing a very large
number of stocks such as the MSCI Emerging Markets.
Physical replication and optimisation
In 2010 HSBC Global Asset Management implemented a screening
of controversial weapons such as anti-personnel mines, cluster
munitions, biological and chemical weapons, and depleted uranium
across the active business to exclude investments in issuers that are
involved in these weapons.
We subsequently expanded this screening to optimised index funds,
and then later to our entire passive ranges including our suite of
ETFs.
The Convention on Cluster Munitions (CCM) took effect in August
2010. Several countries adopted legislation on cluster munition, but
the laws around passive funds investing are not clear cut.
We believe there are several reasons why the decision to expand the
screening across all our equity investments is the right one:
We aim to comply with the spirit and the letter of the law
The screening currently has a minor performance/tracking
impact. We believe that as the focus on this subject increases,
companies still involved might choose to cease their
involvement, reducing the need for screening
Controversial weapons screening: benefit
of doing the right thingClosely Tracked,
Minimised Execution
Costs
Trade
modellingExposure
Management
module
Fund /
Benchmark
module
Access, roles
and privileges
Risk
Management
and reporting
Algorithmic
trades
Order
Management
integration
Passive
investment
process
9Exchange Traded Funds: Our Solutions
1. The contact details of our authorised participants are available on our dedicated ETF website- http://www.etf.hsbc.com/etf/uk/professional/trading.html
Source: HSBC Global Asset Management. For illustrative purposes only.
HSBC ETFs can be bought through a regulated stock exchange.
They are easy to use, a low cost investment option and are widely
available on most online brokerage accounts and through financial
advisers.
How to invest in HSBC ETFs Authorised participants1
HSBC ETFs are supported by a large network of authorised
participants. The following list of institutions are authorised to create
and redeem shares in the ETF range:
You can buy HSBC ETFs during daily trading hours using a
stockbroker. If you do not have a stockbroker already then the
exchange can help you locate a stockbroker. Please note that other
fees may apply.
HSBC ETFs are listed throughout Europe:
London Stock Exchange
Deutsche Boerse
Euronext Paris
Six Switzerland
Borsa Italiana
Stockbroker
HSBC ETFs can be purchased via a wide range of execution
platforms some of which are listed below:
Execution platforms
Why HSBC as an ideal ETF partner?
Aegon
AJ Bell
Alliance Trust Savings
Ascentric
Aviva Wrap
Elevate
Fidelity Funds Network
James Hay
Novia
Nucleus
Raymond James
Standard Life
Transact
Zurich
Official Market Makers
Authorised Participants
Optiver
BAML
Morgan
Stanley
Susquehanna
Flow Traders Virtu
HSBC Global
Markets
Jane Street
Societe
GeneraleCommerzbank
RBC
Goldenberg
Hehmeyer
Focused product
offering
Core index
capabilities covering
a large variety of
markets
Robust investment
process
1. In depth analysis
of portfolio
universe
2. Robust
technology and
support
infrastructure
3. Rigorous risk
monitoring
Track record and
performance
A strong history of
low tracking error
drawn from our
deep experience in
index based
investing
Competitive
pricing
The ability to offer
competitive
TER/OCF across
our ETFs
Transparent
1. Fully transparent
with physical
replication, no
securities
lending
2. All constituents
online
Liquidity and
accessibility
1. Quoted
continuously
throughout the
day on European
exchanges
2. Market making
commitments for
all products
IMC Trading
10Exchange Traded Funds: Our Solutions
HSBC ETF range
Source: HSBC Global Asset Management, as at end of June 2018.
Fund name ISIN
Base
currency TER / OCF AUM (USD)
Dividend
frequency
Replication
method
Developed markets – regional exposure
HSBC MSCI WORLD UCITS ETF IE00B4X9L533
DE000A1C9KL8USD 0.15% 566,734,644 Quarterly Optimisation
HSBC MSCI EUROPE UCITS ETF IE00B5BD5K76
DE000A1C22L5EUR 0.20% 185,260,924 Semi-annual
Physical
replication
HSBC EURO STOXX 50 UCITS ETFIE00B4K6B022
DE000A1C0BB7EUR 0.05% 147,449,230 Semi-annual
Physical
replication
HSBC MSCI PACIFIC ex JAPAN
UCITS ETF
IE00B5SG8Z57
DE000A1C22P6USD 0.40% 36,157,024 Semi-annual
Physical
replication
Developed markets – single country exposure
HSBC S&P 500 UCITS ETF IE00B5KQNG97
DE000A1C22M3USD 0.09% 3,049,015,329 Semi-annual
Physical
replication
HSBC MSCI USA UCITS ETFIE00B5WFQ436
DE000A1C22K7USD 0.30% 75,698,658 Semi-annual
Physical
replication
HSBC FTSE 100 UCITS ETFIE00B42TW061
DE000A1C0BC5GBP 0.07% 214,436,415 Semi-annual
Physical
replication
HSBC FTSE 250 UCITS ETF IE00B64PTF05 GBP 0.35% 55,027,702 QuarterlyPhysical
replication
HSBC MSCI JAPAN UCITS ETFIE00B5VX7566
DE000A1C0BD3USD 0.19% 234,854,804 Semi-annual
Physical
replication
HSBC MSCI CANADA UCITS ETFIE00B51B7Z02
DE000A1JF7N6USD 0.35% 33,791,524 Semi-annual
Physical
replication
Developed markets – property exposure
HSBC FTSE EPRA/NAREIT
DEVELOPED UCITS ETF
IE00B5L01S80
DE000A1JXC78USD 0.40% 146,739,585 Quarterly
Physical
replication
Global markets – broad exposure
HSBC ECONOMIC SCALE
WORLDWIDE EQUITY UCITS ETF
IE00BKZG9Y92
DE000A2JG4F7USD 0.25% 420,249,255 Quarterly N/A (active)
HSBC MULTI FACTOR
WORLDWIDE EQUITY UCITS ETF
IE00BKZGB098
DE000A2JG4G5USD 0.25% 249,201,811 Quarterly N/A (active)
11Exchange Traded Funds: Our Solutions
HSBC ETF range
1. As at 27th July 2018 (launch date).
2. As at 24th April – previously HSBC MSCI South Africa UCITS ETF.
Source: HSBC Global Asset Management, as at end of June 2018.
Fund name ISIN
Base
currency TER / OCF AUM (USD)
Dividend
frequency
Replication
method
Emerging markets – regional exposure
HSBC MSCI AC FAR EAST EX
JAPAN UCITS ETF
IE00BBQ2W338
DE000A1W2EK4USD 0.60% 287,798,451 - Optimisation
HSBC MSCI EM FAR EAST UCITS
ETF
IE00B5LP3W10
DE000A1C22Q4USD 0.60% 37,086,531 Semi-annual Optimisation
HSBC MSCI EM LATIN AMERICA
UCITS ETF
IE00B4TS3815
DE000A1JF7T3USD 0.60% 14,890,688 Quarterly
Physical
replication
HSBC MSCI EMERGING MARKETS
UCITS ETF
IE00B5SSQT16
DE000A1JXC94USD 0.40% 264,465,424 Quarterly Optimisation
Emerging markets – single country exposure
HSBC MSCI BRAZIL UCITS ETFIE00B5W34K94
DE000A1C22N1USD 0.60% 28,140,562 Semi-annual
Physical
replication
HSBC MSCI TAIWAN UCITS ETF IE00B3S1J086
DE000A1JF7R7USD 0.60% 11,143,087 Semi-annual
Physical
replication
HSBC MSCI INDONESIA UCITS
ETF
IE00B46G8275
DE000A1JF7Q9USD 0.60% 45,228,777 Semi-annual
Physical
replication
HSBC MSCI KOREA UCITS ETFIE00B3Z0X395
DE000A1JXC60 USD 0.60% 10,629,552 Semi-annual
Physical
replication
HSBC MSCI MALAYSIA UCITS ETF IE00B3X3R831
DE000A1JF7S5USD 0.60% 4,809,838 Semi-annual
Physical
replication
HSBC MSCI CHINA UCITS ETF1 IE00B44T3H88
DE000A1JF7L0USD 0.60% 367,692,189 Semi-annual
Physical
replication
HSBC MSCI CHINA A INCLUSION
UCITS ETF2 IE00BF4NQ904 USD 0.60% ~10,000,000 QuarterlyPhysical
replication
HSBC MSCI MEXICO CAPPED
UCITS ETF
IE00B3QMYK80
DE000A1JF7P1USD 0.60% 10,796,171 Semi-annual
Physical
replication
HSBC MSCI SOUTH AFRICA
CAPPED UCITS ETF2
IE00B57S5Q22
DE000A1JF7M8USD 0.60% 3,800,469 Semi-annual
Physical
replication
HSBC MSCI TURKEY UCITS ETF IE00B5BRQB73
DE000A1H49V6USD 0.60% 5,563,625 Semi-annual
Physical
replication
HSBC MSCI RUSSIA CAPPED
UCITS ETF
IE00B5LJZQ16
DE000A1JXC86 USD 0.60% 179,010,993 Semi-annual
Physical
replication
12Exchange Traded Funds: Our Solutions
Key risks
The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you
may not receive back the amount originally invested.
Exchange Rate risk: Investing in assets denominated in a currency other than that of the investor’s own currency perspective exposes
the value of the investment to exchange rate fluctuations.
Derivative risk: The value of derivative contracts is dependent upon the performance of an underlying asset. A small movement in the
value of the underlying can cause a large movement in the value of the derivative. Unlike exchange traded derivatives, over-the-counter
(OTC) derivatives have credit risk associated with the counterparty or institution facilitating the trade.
Index Tracking risk: The performance of the Fund may not match the performance of the index it tracks because of fees and expenses,
market opening times and regulatory constraints.
Operational risk: The main risks are related to systems and process failures. Investment processes are overseen by independent risk
functions which are subject to independent audit and supervised by regulators.
Liquidity risk: Liquidity is a measure of how easily an investment can be converted to cash without a loss of capital and/or income in the
process. The value of assets may be significantly impacted by liquidity risk during adverse market conditions.
Emerging Market risk: Emerging economies typically exhibit higher levels of investment risk. Markets are not always well regulated or
efficient and investments can be affected by reduced liquidity.
Focused Strategy risk: Funds with a narrow or concentrated investment strategy may experience higher risk and return volatility and
lower liquidity than funds with amore diversified approach.
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 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.
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.
HSBC ETFs are sub-funds of HSBC ETFs plc (“the Company”), an investment company with variable capital and segregated liability between
sub-funds, incorporated in Ireland as a public limited company, and is authorised by the Central Bank of Ireland. The company is constituted
as an umbrella fund, with segregated liability between sub-funds. Shares purchased on the secondary market cannot usually be sold directly
back to the Company. Investors must buy and sell shares on the secondary market with the assistance of an intermediary (e.g. a stockbroker)
and may incur fees for doing so. In addition, investors may pay more than the current Net Asset Value per share when buying shares and may
receive less than the current Net Asset Value per Share when selling them. UK based investors in HSBC ETFs plc are advised that they may
not be afforded some of the protections conveyed by the Financial Services and Markets Act (2000), (“the Act”). The Company is recognised
in the United Kingdom by the Financial Conduct Authority under section 264 of the Act. The shares in HSBC ETFs plc 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. Affiliated companies of HSBC Global Asset Management (UK) Limited may make markets in HSBC ETFs plc. All applications
are made on the basis of the current HSBC ETFs plc Prospectus, relevant Key Investor Information Document (“KIID”), Supplementary
Information Document (SID) and Fund supplement, and most recent annual and semi-annual reports, 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 from a
stockbroker or financial adviser. Investors and potential investors should read and note the risk warnings in the prospectus, relevant KIID and
Fund supplement (where available) and additionally, in the case of retail clients, the information contained in the supporting SID.
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.
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.
www.assetmanagement.hsbc.com/uk Copyright © HSBC Global Asset Management (UK) Limited 2018 All rights reserved.
18-XB-0619 EXP: 30/11/2018
Contact
For more information, please contact us:
Telephone: 0800 358 3011
Email: [email protected]
Website: http://www.assetmanagement.hsbc.co.uk/en/intermediary
