Passive Fixed Income

Our philosophy

Our passive fixed income management follows an ‘intelligent indexation’ investment approach which focuses on two equally important objectives, close index tracking and minimising transaction costs. Both are embedded in our disciplined and diligent approach and are achieved by leveraging the expertise of our active team.

Our process

Our process is underpinned by our extensive proprietary resources and tools which have been developed over the last two decades, allowing us to align our passive and active fixed income platforms globally.

Leveraging our active expertise includes; our proprietary research from our Global Credit Research team for strategies with credit exposure, our global risk management and risk analytics systems, a dedicated team of fixed income dealers established in different locations around the world, as well as a global communication framework with our active portfolio managers.

The investment process for passive fixed income consists of 5 steps which include; benchmark review, determine investable universe, portfolio modelling and construction, ongoing portfolio management and portfolio implementation. With our dual objective reflected in each step of our process.

HSBC strengths

• Experienced passive manager –our experience and knowledge has allowed us to develop a robust tracking methodology and management approach, focused on adding value for investors
• Differentiated and proprietary resources – our strong intellectual capital and technology needed to deliver efficient passive strategies
• Global fixed income platform – recognised for its robustness across the industry, each strategy and investor solution benefits from our credit research capabilities, our dedicated dealing resources, and our independent risk monitoring function
• Global footprint and local knowledge – with a presence in locations around the world, we have strong local knowledge, which we leverage across our global network

Risk considerations:

• The value of investments may go down as well as up and you may not get back the amount originally invested
• Fixed income is subject to credit and interest rate risk. The value of the underlying assets is strongly affected by interest rate fluctuations and by changes in the credit ratings of the underlying issuer of the assets
• The sub-fund can invest in sub investment grade bonds, which may produce a higher level of income than investment grade bonds, but carry increased risk of default on repayment
• The performance of bonds, gilts and other fixed interest securities tends to be less volatile than those of shares of companies (equities). However there is a risk that both the relative yield and the capital value of these may be reduced if interest rates go up
• Income offered by bonds often reflects, in part, the risk rating of the issuer. The underlying funds can invest in sub investment grade bonds, which may produce a higher level of income than investment grade bonds, but carry increased risk of default on repayment. This may affect the level of income the investor receives and/or the capital value of their investment
• The level of yields is not guaranteed and may rise or fall in the future