THE HSBC AMANAH GLOBAL EQUITY INDEX FUND
u hsbcamanah.comFor professional advisers only
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HSBC Amanah is the Islamic financial services division of the HSBC Group and is uniquely positioned to
understand, structure and deliver financial solutions that are compatible with the requirements of Shariah.
HSBC Amanah is one of the leading global players in the Islamic Finance industry.
u Total assets of Islamic financial institutions have grown by an average of 15-20% per annum* over the past five years
u Sinopia Asset Management (UK) Ltd is the Investment Adviser for the HSBC Amanah Global Equity Index Fund
u Sinopia launched its first equity index fund in 1990 and has a long track record in managing index funds
u Sinopia’s indexation process and strategies are designed to consistently deliver index returns, whilst minimising trading
associated costs and tracking error risk through a distinct quantitative process
u The Global Equity Index fund is a sub-fund of the HSBC Amanah Funds SICAV and it has the potential to provide
diversification as a strategic investment
u Index funds offer diversification in a broad section of the market.
*Source: HSBC Amanah, October 2008 and www.zawya.com
The HSBC Amanah Global Equity Index Fund
HSBC Amanah
HSBC Amanah is the Islamic financial services division of
the HSBC Group. With experienced personnel working from
regional offices, its mission is to ensure that HSBC is one
of the leading providers of value-added Shariah compliant
financial products and services to its clients.
The HSBC Amanah Funds SICAV is an investment company
(Société d’Investissement à Capital Variable) constituted
in the Grand Duchy of Luxembourg and qualifies as an
Undertaking for Collective Investment in Transferable
Securities (a ‘UCITS’). The Company is organised as an
umbrella structure with the ability to issue shares of
different classes corresponding to different sub-funds.
HSBC Amanah Funds SICAV is specifically designed
for investors who wish to invest in equity markets in
compliance with Shariah (Islamic law).
HSBC Amanah is guided and supervised by the HSBC
Amanah Central Shariah Committee, an independent
committee of Islamic scholars. The Committee oversees
the development and operations of all HSBC Amanah
products and transactions to ensure that they meet the
requirements of Shariah.
Central Shariah Committee
Three scholars of international repute, well versed in
both Islamic law and modern finance, serve on the HSBC
Amanah Shariah Committee. The Central Committee not
only provides initial approvals on investment objectives
and investment strategies of all funds, but also reviews
the investments periodically to ensure the continuous
compliance of the investments of the funds to Islamic
principles. Moreover, the committee conducts annual
audits of all funds to ensure adherence to their rulings
during the year.
Sheikh Nizam Yaquby
Sheikh Nizam is a graduate in Economics and Comparative
Religion from McGill University and is an internationally
acclaimed scholar in the Islamic banking industry. He has
been a teacher of Tafsir since 1976. He advises a number of
banks and financial institutions including Abu Dhabi Islamic
Bank, BNP Paribas, Dow Jones† Lloyds TSB and Standard
Chartered on Islamic banking and finance.
Sheikh Dr Mohamed Elgari
Sheikh Mohamed holds a PhD in Economics from the
University of California. He is an expert at the Islamic
Jurisprudence Academy (OIC), Jeddah. Dr Elgari is the
editor of the Review of Islamic Economics. He is also an
adviser to several Islamic financial institutions worldwide
and the author of many books on Islamic banking.
Dr Mohamed Imran Ashraf Usmani
Dr Usmani holds a PhD in Islamic Finance. He also
obtained degrees of Alimiyyah and Takhassus (specialisation
in Islamic Jurisprudence) from Jamia Darul Uloom, Karachi.
His area of expertise is Islamic Finance in which he has
carried out extensive research. Dr Usmani is a faculty
member/teacher of Jamia Darul Uloom, Karachi and
Institute of Business Administration (IBA), Karachi. He is
the author of various books on Shariah (Islamic law).
All Shariah compliant investments must be certified by
experts in Shariah, generally through a panel or board
comprised of respected Shariah scholars who are qualified
to issue ‘Fatwas’ (religious rulings) on financial transactions.
This panel of Shariah experts ensure full compliance of
all Shariah compliant investment funds. For illustration,
the Central Shariah Committee of HSBC Amanah has
determined that investment funds investing in equities as
an asset class will not invest in companies whose primary
business activity is as shown in Figure 1 (sectoral screens),
or in companies which exhibit characteristics as shown in
Figure 2 (financial screens)*.
*The above screens apply only to funds managed using the Dow Jones† Islamic Market indices. For funds using the MSCI††, different financial screenings will
be used.
Figure 1: Sectors Figure 2: Financial
Alcohol Weapons All the following should be less than 33%
Tobacco Pork Total Debt/12 month trailing market capitalisation
Financial services Gambling Cash & Interest bearing securities/12 month trailing market capitalisation
Pornography Leisure/media Accounts Receivable/12 month trailing market capitalisation
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The HSBC Amanah Global Equity Index Fund
The Fund meets Shariah principles as interpreted and laid
down by the Shariah Committee and provided to the Board
of Directors. The investment process ensures adherence to
Shariah principles which HSBC Amanah’s Central Shariah
Committee closely monitor.
The HSBC Amanah Global Equity Index Fund aims to create
long-term appreciation of capital through investment in a
well-diversified portfolio of equities listed worldwide, as
defined by the relevant world index, in a manner that is
consistent with the principles of the Shariah law. Investors
have access to equity markets through an experienced
manager and service provider, with daily liquidity and the
highest standard of compliance with Islamic principles.
The fund is managed by Sinopia, the specialist quantitative
management arm of the HSBC Group.
Why an Islamic global equity index fund ?
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Total assets of Islamic financial institutions have grown
by an average of 15-20% per annum over the past five
years*, suggesting strong demand for Islamic investing.
It is expected Islamic finance will continue to grow at this
rate for the next few years and that total assets in Islamic
finance will reach $1 trillion by 2012. The growth in Islamic
finance has also been mirrored in the growth of Shariah
compliant investment funds. It is estimated that currently,
there are more than US$30 billion under management in
Shariah compliant investment funds**.
A Global Equity Index fund has the potential to provide
diversification as a strategic investment within a balanced
portfolio. Companies in an index are carefully selected and
are representative of various industries. Global equities can
be used defensively, diversifying the risk found in single
country investments. This spreads risk among many stocks
and keeps the investment diversified. Globalisation has
aided the rise of multinational giants that derive much of
their revenue from global markets other than their own. A
global investment approach can help your clients participate
in the growth potential of these industry leaders, wherever
they may be headquartered.
* Source: HSBC Amanah, October 2008 and
www.zawya.com
** Source: www.zawya.com
Why HSBC Amanah Global Equity Index fund ?
HSBC Amanah is uniquely positioned to understand,
structure, and deliver financial solutions that are compatible
with the requirements of Shariah. It is headquartered in
Dubai, and with regional representatives in New York,
Riyadh, Dubai, London, Jakarta and Kuala Lumpur, HSBC
Amanah is one of the leading global players in the Islamic
finance industry.
Sinopia Asset Management is the specialist for quantitative
asset management of the HSBC Group, providing robust
quantitative investment solutions in a controlled risk
environment for all types of investors. The highly innovative
product offering, the disciplined investment strategies and
the specialised staff have made Sinopia a key player in the
quantitative asset management community.
Sinopia’s indexation process and strategies are designed to
consistently deliver index returns, whilst minimising trading
associated costs and tracking error risk through a distinct
quantitative process. Sinopia launched its first index fund in
1990 and has a long track record in managing index funds.
Investment strategy
This sub-fund aims to create long-term appreciation of
capital through investment in a diversified portfolio of
securities which meets Islamic investment principles
as interpreted and laid down by the Shariah Supervisory
Committee and provided to the Board of Directors. The
fund adopts a pragmatic full replication strategy using the
Dow Jones† Islamic Titans 100 Index as the underlying
index. The objective is to neutralise key risk sources such
as fund weight deviations (vs index), sector and country
neutrality. Changes to the index are analysed and replicated
after taking into consideration the trade-off between
tracking error and trading costs. This fund is a quantitative
indexed fund.
Investment process
Sinopia’s indexation process and strategies are designed to
deliver index returns, whilst minimising trading associated
costs and tracking error risk through a distinct quantitative
process. The fund strategy is determined by the index it
aims to fully replicate. The fund manager monitors the
ex-ante (predicted) tracking error on a weekly basis or
when executing transactions. ‘Northfield’ is the dedicated
tool used by the Equity Indexation team to estimate
volatility and tracking error calculations. The team check the
adequacy of the fund’s risk and the parameters of the fund
and report any breaches to the head of the team. The load
difference is calculated for each stock held in the index fund
and compared against upper and lower threshold limits. All
index funds are monitored on a daily basis with respect to
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‘load’ differences (i.e. the difference between the weight
of a stock, a country, a sector, a capitalisation class in the
index and the fund). This analysis of the load differences
allows us to quickly identify any potential sources of
tracking error and allows us to monitor it.
The difference between an Index fund’s performance and
the Index is measured on a daily basis. Any significant
difference in the tracking error or in the investment is
therefore quickly established.
Sinopia follow a three-step process when implementing
and managing index funds and mandates:
Step 1: Preliminary index analysis
They analyse the underlying index with respect to the
number of investible securities, liquidity, volume, index
turnover, volatility, sector/industry composition and
large cap/small cap distribution. This analysis allows an
informed decision to be made on what would be the most
pragmatic and cost effective approach to tracking the
performance of the fund’s index.
Step 2: Portfolio construction
Once the investible universe of securities has been
defined we construct the initial portfolio using one of the
range of available index tracking methodologies. A full
replication methodology is applied in the case of the HSBC
Amanah Global Equity Index Fund as the index consists of
a limited number of member stocks and the constituent
markets are highly efficient.
Sinopia employs a matrix approach to manage factor risk
in the equity portfolio to ensure that it has neutral position
risk exposure relative to the risk exposures implied by the
index. The risk exposures managed include country and
sector bias.
The portfolio is continually monitored and adjusted to
incorporate cash flows, corporate actions and market
information.
Step 3: Trading analysis and implementation
In order to limit the erosion of portfolio returns Sinopia
emphasise controlling the cost of trading the index
portfolio. Generally, an analysis is undertaken to estimate
the component trading costs and risks of the individual
stocks in a portfolio, as well as the costs of a large
rebalancing.
Orders are executed via a centralised dealing team. The
objective is to bulk order flow to reduce trading costs and
maximise the supply of internal liquidity through crossing
and order matching.
As risk management is key to Sinopia’s investment and
allocation process, a number of processes are continually
deployed to ensure that investment and operational risks
are actively managed. Trade orders are input and analysed
through a front office system which is controlled by Group
Compliance to ensure that portfolio mandates are adhered
to in accordance with portfolio objectives and regulatory
considerations.
A performance attribution system allows the fund
manager to observe the portfolios performance on a real
time basis to ensure it performs in line with the index and
immediately determine the sources of any unexplained
performance deviations.
As risk management is key to Sinopia’s investment and
allocation process, all the sources of risk are strictly
monitored and controlled at each stage of the process.
Through the use of internal and external tools, the
investment process gives a very significant place to
risk management issues: the calculation, management
and control of absolute and relative risks. Portfolios are
explicitly built taking into account the trade-off between
expected return and risk levels. On an ongoing basis,
Sinopia’s investment process incorporates the constant
monitoring of portfolio exposures, absolute or relative
risk levels, as well as a strict control of operational risk.
All tools incorporate a daily data-feed, which enables risk
analysis to be continuously updated.
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The investment team
((YY/YY): Number of years at Sinopia / Number of years experience - as at 31/10/08)
Jean Francois Schmitt (8/15), Global Head of Equity - Sinopia Asset Management
10 portfolio managers
Paris Francois Dossou, Deputy Head (10/10) Jeanne Follet (1/9)
Patrick Gautier (7/9) Nadia Ben Djemiaa (4/4)
Laurence Jobert (1/9) Malika Oueznadji (7/7)
London Nils Jungbacke (7/11) Sunny Wu (4/6)
Harvey Sidhu (8/10)
Hong Kong Benedicte Mougeot, Deputy Head (13/13)
3 assistant managers
Paris Abderrahman Belcad (3/3)
Sylvain Treilles (1/1)
Jeremy Pierre (1/1)
Celine Boe-Deschamps (9/9), Head of UK Trading
6 equity traders
Paris Jerome Allouch, Deputy Head (1/8)
Julien Tourchon (1/6)
Ekaterina Diatchenko (2/4)
Elena Ripca (1/1)
Gabriel Taboul (1/1)
Hong Kong Elie El Khoueiri (3/3)
Fund Characteristics
Fund name: HSBC Amanah Global Equity Index Fund
Portfolio manager: Harvey Sidhu
Management company: HSBC Investment Funds (Luxembourg) SA
Legal form: Sub Fund of the Luxembourg based HSBC Amanah Funds SICAV
Investment adviser: Sinopia Asset Management (UK) Limited
Management style: Indexation (full replication)
Index: Dow Jones† Islamic Titans 100 Index.
Restrictions: Shariah principles
Universe: Dow Jones† Islamic Titans 100 Index
Fund tracking error: Expected maximum of 50bps
Number of stocks: Around 100
Management fees: 0.75%
Subscription fees: up to 5.54% of the net asset value per share
Redemption fees: None
Dealing: Daily
Valuation: Daily
Settlement: T+4
This document is intended for investment professionals only and should not be distributed to retail clients. HSBC Amanah Funds SICAV is a Luxembourg
domiciled SICAV and is regulated by the CSSF. HSBC Amanah Funds SICAV cannot be sold by anyone in any jurisdiction in which such offer or solicitation is not
lawful or in which the person making such an offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.
All applications are made on the basis of the current HSBC Amanah Funds SICAV Prospectus, simplified prospectus and most recent annual and semi-annual
reports. These can be obtained on request and free of charge from HSBC Global Asset Management (UK) Limited or the local distributors. The securities
representing interests in HSBC Amanah Funds SICAV have not been and will not be registered under the US Securities Act of 1933 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 United States person, except in a transaction
which does not violate the Securities Law of the United States of America. The value of investments may go down as well as up and you may not get back the
full amount you invested. Where overseas investments are held the rate of exchange may cause the value of investments to go down as well as up. Markets
in some countries can be described as ‘emerging markets’. Some of these may involve a higher risk than where an investment is within a more established
market. Where a sub-fund invests predominately in one geographical area, any decline in economic conditions may affect prices and the value of underlying
investments. HSBC Global Asset Management (UK) Limited provides information to professional advisers and their clients on the investment products and
services of members of the HSBC Group. The material contained in this document is for information only and does not constitute investment advice or a
recommendation to any reader of this material to buy or sell investments. The funds mentioned in this document may not be registered for sale or available in
all jurisdictions. For available funds please contact your local HSBC office. It is possible that the restrictions placed on investment such as the prohibition on the
use of interest bearing investments, the donations to approved Charities and the limited universe of stocks available to the Investment Adviser may result in the
funds performing less well than funds with similar investment objectives which are not subject to Shariah restrictions.
This document is issued by HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ, UK. Authorised and regulated by
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This product is marketed in a sub-distributing capacity on a principal – to – principal basis by the HSBC Global Asset Management MENA, a unit that is part of
HSBC Bank Middle East Limited, PO Box 66, Dubai, UAE, which is incorporated and regulated by the Jersey Financial Services Commission. Services are subject
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The information provided has not been prepared taking into account the particular investment objectives, financial situation and needs of any particular investor.
As a result, investors using this information should assess whether it is appropriate in the light of their own individual circumstances before acting on it. The
information in this document is derived from sources believed to be reliable, but which have not been independently verified. However, HSBC Bank Middle East
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HSBC Bank’s Terms of Business. 16419/ME/0309
† Source: Dow Jones and Dow Jones Islamic Market Titans Index SM are service marks of Dow Jones & Company, Inc. and will be licensed for use by HSBC
Investment Funds (Luxembourg) S.A. The HSBC Amanah Global Equity Index Fund is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones
makes no representation regarding the advisability of investing in the Fund.
† † Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used
to create any financial instruments or products or any indices. The MSCI information is provided on an ‘as is’ basis and the user of this information assumes
the entire risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any other person involved in or related
to compiling, computing or creating the MSCI information (collectively, the ‘MSCI Parties’) makes any express or implied warranties or representations with
respect to such information or the results to be obtained by the use thereof, and the MSCI Parties hereby expressly disclaim all warranties (including, without
limitation, all warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect
to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive,
consequential or any other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise have anticipated, the possibility of
such damages.