HSBC GIF GLOBAL EMERGING MARKETS EQUITY HSBC Global Asset Management Sub-fund of Luxembourg domiciled Sicav - Part 1 Report Issued: July 2009 Peer Group:
Group Contact No:
Global Emerging Markets Equities
+44 20 7024 0410
Fund Manager/Adviser:
Website:
Nick Timberlake (since April 2005) www.assetmanagement.hsbc.com Location: S&P ID Number: EM358604 London Share class screened: Launch Date: April 2003 Ord
INVESTMENT STYLE
Fund Size (April 2009): US$174.6m
RISK RETURN (STD DEVIATION) OVER 5 YEARS
Further information on S&P's fund coverage can be found at www.FundsInsights.com Performance Data Source - © 2009 Morningstar, Inc. All Rights Reserved. All statistical data on this report has been run to 31/03/2009 on NAV to NAV basis, with gross income reinvested, in US Dollars.
STANDARD & POOR'S OPINION (JULY 2009) Nick Timberlake has managed this fund since April 2005. He follows a largely bottom-up approach where the stock ideas of three experienced regional colleagues are gradually added to the portfolio on growing conviction and the portfolio structure is influenced by top-down inputs from HSBC's economic and macro team.
3 YEAR RISK CHARACTERISTICS Maximum Drawdown (%) Volatility
High
-64.4
Medium
31.5
Correlation
High
1.0
Beta
High
1.0
SHARPE RATIO VS PEER GROUP
The portfolio is well diversified, with 80-120 names, although sector deviations are unconstrained. This reflects the bottom-up emphasis of the team. Risk controls at country and stock level help to avoid overconcentration. However, in the recent global We have regard for Timberlake both as a capable financial crisis, performance was hit hard by global emerging markets fund manager and as maintaining too great an exposure to financials and leader of an effective team where each regional resource stocks into the downturn. specialist plays an important role in developing The team was also too early to add risk back into the strong views on stocks from their rigorous portfolio and performance was hit again when the fundamental analysis. Stephanie Wu, who covers recovery it anticipated was slow to start. Despite Asia, and Douglas Helfer, EMEA, both worked with these caveats we continue to believe Timberlake Timberlake at F&C and moved with him to HSBC. and his team can be effective global emerging José Cuervo, who is a LatAm specialist, was already markets fund managers and the fund retains its S&P A rating.
FACT FILE Group: HSBC Global Asset Management is the global fund management arm of HSBC Holdings, one of the world's largest banking and financial services organisations. It comprises four specialist businesses: Halbis, Sinopia, Multi-manager and Liquidity.
CALENDAR YEAR DECILE RANKS
in place and has fitted in well to Timberlake's way of doing things.
their GEM business from 1997 to 2005. He joined HSBC in April 2005 as GEM team head.
Style: Combining top-down analysis with bottom-up
research, the team constructs a portfolio of 80-120 names. Idea generation is pragmatic, targeting companies with 15-20% upside potential over 12-18 Team: The GEM equity team comprises lead months. manager Timberlake and three experienced portfolio Performance: Over the five years to 31/03/2009, managers. They are supported by HSBC's broader the fund has returned 13.6%, compared with 19.6% analytical resources, including a new frontiers team for the sector median and 39.2% for the index, of three. ranking 382/521. Fund Manager: Timberlake spent six years covering small-caps at F&C, before helping develop
FUND MANAGER & TEAM Timberlake and team manage assets of around $2.4bn. They have access to HSBC's broader teams: EMEA (five analysts), Latin America (seven), Hong Kong/Singapore (eight), frontiers team (three) and 10 regional portfolio managers, and can also consult the emerging markets debt and economics/macro teams. Nick Timberlake - MA (Hons) (University of Dundee), joined F&C in 1991 as a small-cap analyst, before moving on to their emerging markets team in 1997. He moved to HSBC in 2005 to head the GEM team. Stephanie Wu - MSc economics (London School of Economics), joined F&C in 1994 on the emerging markets team, where she covered Asia. She moved to Invesco in 2004, before joining HSBC in January 2006. Decile ranking in discrete annual periods. 1st decile shown as rank 10, 2nd decile as rank 9, etc. to 10th decile as Rank 1.
José Cuervo - BA commerce (University of British Columbia), served as a North American equity analyst at Phillips, Hager & North Investment, before joining HSBC's GEM team in September 1998.
Douglas Helfer - MBA finance (City University), MA Russian studies (University of London), worked for Brunswick Asset Management in Russia, before joining F&C, where he headed EMEA mandates. He Please see page 2 for required research analyst moved to HSBC's GEM team in January 2006. certification disclosure.
HSBC GIF GLOBAL EMERGING MARKETS EQUITY
PORTFOLIO CHARACTERISTICS
Peer Group: Global Emerging Markets Equities
No. of holdings
115
Turnover ratio (%)
N/A
% in top 10
29
TOP 10 HOLDINGS (01/04/09) % Petroleo Brasillier
4.5
China Mobile
3.2
Teva Pharmaceutical Industries
3.0
MTN Group
2.9
Samsung Electronics
2.9
Companhia Vale do Rio Doce
2.7
Gazprom
2.7
Itau Unibanco Bco
2.7
China Const BK
2.4
China Life Insurance
2.2
* In top 10 holdings a year ago
ALLOCATION BREAKDOWN (01/04/09) Fund % Asia
56.7
Cash
3.7
EMEA
22.5
Latin America
17.1
MANAGEMENT STYLE • The team analyses factors such as sustainability of returns, efficient cashflow generation, attractive valuations and strong management (the team meets 200-300 companies a year). It then formulates fair • The process is based around bottom-up value estimations and expected returns. stockpicking. GEM team members cover stocks in their regions of expertise (Wu on • Timberlake constructs a well-diversified Asia, Cuervo Latin America and Helfer portfolio of 80-120 names in a gradual EMEA). Idea generation is pragmatic, largely process where position size depends on drawing on own experience. Mispriced stocks conviction. Exposure is to a minimum of nine Sector deviations are are targeted and the time horizon is typically countries. 12 months. External research is used to unconstrained, but active country and stock corroborate ideas. Top-down views are used positions are limited to +/-10% and +/-3% respectively. Cash is limited to 10% and is to help portfolio construction. used actively. • The fund aims to outperform the MSCI Emerging Markets index using a combination of bottom-up analysis and top-down research.
PORTFOLIO REVIEW PERFORMANCE STATISTICS 3 Years
5 Years
Fund
-30.1%
13.6%
Standard & Poor's Peer Median
-28.5%
19.6%
Index** Fund Rank Standard Deviation Relative Standard Deviation Volatility Adjusted Ranking
CUMULATIVE PERFORMANCE
-20.9%
39.2%
353/589
382/521
31.5
-
1.1
-
322/589
-
In spring 2009 the portfolio was positioned to benefit from recovery as the global economy began to come out of recession following unprecedented fiscal stimulus policies. Key themes included identifying stocks, such as Korean banks, that were still trading at distressed valuations despite low risk to their balance sheets, and beneficiaries of government stimulus packages, such as Chinese cement stocks, and selected engineering stocks throughout the region. They also included deep value plays, such as Gazprom.
China, South Africa, Korea, India and Taiwan were all overweight the benchmark, while Malaysia, Chile, Poland, Brazil and Mexico were underweight. Financials, industrials and materials were the biggest sector overweights and consumer staples and utilities were the largest underweights. Style Research showed small positive tilts to growth factors, with an emphasis to sales growth. Tracking error was toward the bottom of the usual 3-8% range, with stock selection the biggest contributor.
PERFORMANCE ANALYSIS (APRIL 2009) Since Timberlake took over the management of this fund in April 2005, its performance has been marginally behind our sector peer group median fund, but trails the MSCI Emerging Markets benchmark by around eight percentage points cumulatively. Good absolute returns in 2005/2006 were close to the median but 2007 was a strong year when top-quartile performance came from strong stock selection particularly in Egypt, Korea and Taiwan.
crisis took hold, relative performance fell away sharply between August 2008 and February 2009, as the portfolio remained too exposed to financials and resources stocks for too long.
After the crisis hit they were too soon to add risk back into the portfolio and Chinese infrastructure plays and Indian exposure, such as Reliance Capital and Bumi Resources, hurt performance. Exposure to second-tier companies, where stock prices However, in 2008 relative and absolute were savaged in illiquid markets also hurt. performance were both poor. As the financial DISCRETE PERFORMANCE (CALENDAR YEARS)
Fund Index** Median
2005 % Rank 33.6 222/553 35.2 32.2
2006 % Rank 30.9 318/584 35.1 31.4
2007 % Rank 43.1 95/614 40.3 37.2
2008 % Rank -57.4 469/630 -53.7 -54.8
YTD 31/03/2009 % Rank -2.1 448/639 1.2 -0.8
** S&P/IFCI Composite USD All of the views expressed in this research report accurately reflect our committee's views regarding any and all of the subject securities or issuers.No part of the committee's compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.© [2009] The McGraw-Hill Companies, Ltd trading as Standard & Poor's ("S&P") 20 Canada Square, Canary Wharf, London, E14 5LH Tel: +44 (0)20-7176 3800. All rights reserved. No part of this publication shall be reproduced, stored in any retrieval system or transmitted in any form electronic or otherwise without the prior written consent of S&P. Any part of the publication by S&P of which this page is a part is made accessible subject to the terms and conditions which are accessible at the url address below ("S&P Terms") - by accessing and viewing this page and/or and pages associated with or attached to it you accept the S&P Terms. Go to http://www.funds-info.standardandpoors.com Performance Data Source - © 2009 Morningstar, Inc. All Rights Reserved. The performance information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
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