HSBC launches 2X global macro fund

Date: Tuesday, October 5, 2010
Author: Bill McIntosh, The Hedge Fund Journal

HSBC Global Asset Management is to launch a new 200% levered global macro UCITS product based on its flagship absolute return portfolio, the HSBC GIF Global Macro Fund. The existing macro fund has a three year track and with assets under management of around $850 million ranks in the top handful of UCITS hedge funds.
 
The new HSBC GIF Global Macro II Fund will be a Luxembourg-domiciled SICAV offering daily liquidity. The existing fund, launched in June 2007 by co-managers Guillaume Rabault and Jim Dunsford, has shown annualised returns of over 5%. 
 
 

“Our philosophy is to generate stable returns in the long run uncorrelated with the major asset classes,” Dunsford said in an interview. “In the long run we want to focus more on relative value strategies. It is why our returns were modest in 2009. We were up 5.5% in 2009 having been up 10% in 2008. That’s because we didn’t have any significant directional long positions in equities in 2009. Virtually all our equity returns in 2009 came from relative value trades. We have virtually zero correlation with the MSCI.”
 

The macro investment strategy of the HSBC GIF Global Macro II fund is identical to the original portfolio.  Investing in a wide variety of liquid asset classes including cash, equities, bonds and currencies worldwide, the fund seeks to exploit pricing anomalies using complementary quantitative and qualitative based strategies. Rather than gearing up in a conventional sense, the 2X portfolio will be constructed by doubling up the positions of the existing fund. 
 
Rabault and Dunsford aim to deliver stable absolute returns with minimal correlation to major asset classes.  The return objective is one month Euribor plus 1200 basis points with an annualised volatility of 15% - twice the current volatility budget of the HSBC Global Macro Fund. 
 
The strategies employed are either market-neutral exploiting valuation differences across a given asset class or directional. The team also analyses cross-asset class opportunities. Exposure to the different asset classes is primarily achieved by taking long and short positions in financial derivative instruments, including equity futures, options, bond futures, credit default swaps, currency forwards and non-deliverable currency forwards. 
 
 

“This launch is very simply driven by client demand,” said Charles Robinson, head of Alternative Distribution, HSBC Global Asset Management. “Investors praise our team for their distinguished process and performance. However many macro investors seek higher returns and can stomach greater volatility so our base strategy is too conservative to meet these needs. As we have prior experience recalibrating our capabilities to meet different return objectives, we were happy to engineer the same solution in our flagship UCITS III strategy.”
 

To read an extended interview with Dunsford on the fund’s approach to risk and macro investing see the forthcoming October issue of The Hedge Fund Journal.