HSBC is to close the HSBC Multi-Adviser Arbitrage Fund (AuM USD 252.24m as at 30 June 2006) to new investment at USD 300m.
Jamie Murray, global head of institutional business department and sales at HSBC Republic Investments Limited (HRIL), the Investment Adviser to the Fund, said: "The HSBC Multi-Adviser Arbitrage Fund has been very popular with investors looking to diversify their bond or balanced portfolios, as it has had the ability to produce returns comparable to government bonds, but with half the volatility. As the fund's returns have been negatively correlated to bond returns, it has also provided good diversification for these portfolios'.
"We intend to close the fund at USD 300m in order prevent dilution and maintain returns for investors. However, the launch of a new fund will enable us to continue to offer investors a full range of investment choices enabling full access to the hedge fund universe."
The fund aims to provide a total return from selective allocation to a number of hedge funds which invest and trade in various arbitrage and relative value strategies. Returns have been positive in ten of the last eleven years and, since launch on 15 June 1995, the fund has delivered an annualised return after fees of 6.3% with an annualised volatility of 3.4%. By contrast the JP Morgan Global Government Bond Index experienced an annualised return of 5.3% and an annualised volatility of 6.3% over the same period.
HSBC intends to launch an alternative arbitrage fund of hedge funds later this year. The fund will form part of the HSBC Uni-Folio range which offers a broad choice of fund of hedge funds targeting specific strategies or geographic regions. It will be a diversified portfolio investing in a broad range of arbitrage and relative value strategies including event driven, convertible arbitrage and fixed income arbitrage.
The fund is available in a US Dollar class or hedged into Euro, Swiss Franc and Sterling.
The fund's strategy allocation (as at 30 June 2006) is: Multi-strategy/event driven 56%; Market neutral 15%; Convertible arbitrage 15%; Fixed income arbitrage 9%; Cash 5%.