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HSBC to launch Ucits market neutral fund

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HSBC Global Asset Management is to launch an equity market neutral Ucits fund that will invest in developed European markets primarily through equities and equity swaps.

It is HSBC’s fourth single manager Ucits fund and comes amid unprecedented growth in onshore absolute return investment strategies

The HSBC GIF European Alpha Equity Fund will launch on 8 April. It will have daily liquidity and target equity-like returns with a maximum annualised volatility target of ten per cent with minimal correlation to European equities.

“This is not simply a Ucits clone of our popular Cayman domiciled European Alpha fund,” says Charles Robinson (pictured), global head of alternatives distribution at HSBC Global Asset Management. “Rather, it is a strategy constructed with daily liquidity in mind, greater capacity, and a risk/return profile that falls somewhere between our base class and our 2.5x levered share class. While it is the same team and the same philosophy, it does differ as the low correlation with the existing fund reveals.”

The four-strong team that manages both the Ucits and the Cayman domiciled funds is led by senior portfolio manager Vis Nayar. The strategy was incubated within European Alpha from April 2008 and returned a total of 24.7 per cent in Euro currency terms to the end of February based on a gross exposure of 200 per cent. It has generated performance on both the short and long books and in 2008 the sub-fund returned 13.1 per cent when the MSCI Europe index fell 35 per cent.

The minimum investment in the new fund is USD5,000 for the retail share class and USD1m for the institutional share class with respective annual management fees of 1.5 per cent and 1.0 per cent. The performance fee is 20 per cent over one month Euribor for both share classes.

In a universe of about 700 stocks, the portfolio managers will look to exploit fundamental equity pricing anomalies using complementary quantitative and qualitative strategies. The fund will use more short positions to diversify risk, holding about 80 stocks, typically split between 35 long and 45 short.

It is part of HSBC Global Asset Management’s Luxembourg-domiciled Global Investment Funds range, which is distributed in around 35 countries. The new fund adds to HSBC’s Ucits funds platform, which already includes the HSBC GIF Global Macro, HSBC GIF Global Currency and the HSBC GIF Global Bond Market Neutral funds.

Deutsche Bank estimates that there are around 265 single manager hedge funds operating with a Ucits wrapper running USD47bn in assets. Rapid growth is expected to see the number of managers using the Ucits structure surpass 400 by the fourth quarter of 2010.

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