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HSBC launches global inflation linked bond fund

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HSBC Global Asset Management has launched a global inflation linked bond fund that invests in a portfolio of sovereign inflation-linked bonds issued by OECD countries such as Australia, Canada, Sweden, UK, US and Japan and some countries in the Eurozone.  

Managed by HSBC Global Asset Management’s quantitative based fixed income team led by Jean-Charles Bertrand, chief investment officer, quantitative strategies, the HSBC GIF Global Inflation Linked Bond fund follows a quantitative management approach to inflation linked bonds which has been implemented since the team launched its first inflation linked bond fund in 2000.

This team manages more than USD2.7bn in inflation linked bond assets as at end June 2010.

HSBC Global Asset Management has launched the global inflation linked bond strategy through a Luxembourg-based Sicav within HSBC’s flagship Global Investment Funds range.

Given current economic uncertainties, HSBC Global Asset Management believes that future inflation is a concern. Accommodating monetary policies, combined with significant public deficits in developed economies, may lead to higher realised inflation in the next three to five years. In the short-term, inflation pressure is likely to derive from emerging countries’ strong economic growth, demand for commodities and currency appreciation.

Bertrand says: “Inflation linked bonds provide the most effective hedge against inflation when compared to other asset classes, including real estate and commodities, as they are the only asset class whose return is directly adjusted to the realised rate of inflation. In addition, inflation linked bonds demonstrate low correlation to nominal bonds, diversify a fixed income portfolio and improve its overall risk-adjusted potential.”

The fund seeks to add value primarily through country allocation and is completely hedged against currency risk. Minimum investment is USD1m for institutional investors and USD5,000 for retail investors, with annual management fees of 0.35 per cent and 0.70 per cent respectively. The fund has daily liquidity and is available in the base currencies of EUR, GBP, HKD, SGD and USD.

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