HSBC launches bond fund to hedge against inflation concerns

HSBC Global Asset Management has launched a global inflation linked bond fund to capitalise on growing inflation concerns.

The HSBC GIF Global Inflation Linked Bond fund sits within HSBC’s flagship Global Investment Funds (GIF) range and invests in a portfolio of sovereign inflation-linked bonds issued by OECD countries such as Australia, Canada, Sweden, UK, US, Japan and some countries in the eurozone.

The Luxembourg-based Sicav fund is managed by HSBC Global Asset Management’s quantitative based fixed income team led by quant strategies CIO Jean-Charles Bertrand, and seeks to add value primarily through country allocation. The fund is also completely hedged against currency risk.

Given current economic uncertainties, the firm believes that future inflation is a concern. In the short-term it sees inflation pressure coming as a result of emerging countries’ strong economic growth, rising demand for commodities and currency appreciation.

In the longer term the firm predicts the risk will come from developed economies as governments take a lenient approach to monetary policy in their attempts to tackle significant public deficits.

On the launch Bertrand said: '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.'

Minimum investment is $1 million for institutional investors and $5,000 for retail investors, with annual management fees of 0.35% and 0.70% respectively.

The fund has daily liquidity and is available in the base currencies of: EUR, GBP, HKD, SGD and USD.