HSBC Managed Solutions India Moderate Fund

The HSBC Managed Solutions India Moderate Fund (HSBCIndia Moderate) is a pooled investment vehicle that seeks to provide investors with longterm capital growth by taking a balanced exposure to Indian equities and fixedincome securities. Managed by HSBC Global Asset Management, the fund is positioned for investors who want a moderate risk profilemore aggressive than a pure bond fund but less volatile than a pure equity fund.

Key Objectives & Investment Philosophy

• Growthoriented equity exposure: The fund invests primarily in highquality Indian companies with strong fundamentals, attractive valuation metrics, and solid earnings growth potential.
• Capital preservation through fixed income: A portion of the portfolio is allocated to Indian government and corporate bonds, moneymarket instruments, and other shortduration debt securities to temper equity volatility.
• Dynamic asset allocation: The funds managers regularly review the balance between equities and debt, adjusting the mix in response to macroeconomic trends, market sentiment, and risk assessments.
• Currency considerations: As a fund denominated in USD (or GBP depending on the share class), the performance also reflects the INRUSD exchange rate.

Why Choose a ModerateRisk Indian Fund?

Indias economy is projected to be one of the fastestgrowing major markets for the next decade. A moderaterisk approach allows investors to capture a share of that growth while limiting exposure to the sharp swings that can accompany a purely equityfocused strategy. The fund aims to achieve a riskadjusted return profile that aligns with investors who have a mediumtolongterm investment horizon (typically 510 years).

Fund Structure & Key Features

• Fund type: Openended mutual fund (retail and institutional share classes).
• Currency: Primarily USDdenominated; a GBPdenominated share class is also available for UK investors.
• Investment horizon: Minimum 5 years recommended.
• Liquidity: Daily redemption at net asset value (NAV).
• Expense ratio: Competitive with other balanced Indian funds (approximately 0.95% 1.10% p.a., depending on share class).
• Minimum investment: US$5,000 (or equivalent).

Asset Allocation Snapshot (as of latest reporting period)

The chart illustrates the typical split: around 6070% in equities, 3040% in fixed income, with a small allocation (under 5%) to cash and shortterm instruments. The exact percentages shift quarterly based on the managers outlook.

Equity Component How Selections Are Made

HSBCs equity team employs a bottomup research methodology focused on three pillars:

1. Fundamental strength: Revenue growth, profit margins, return on capital, and cashflow generation.
2. Valuation discipline: Preference for companies trading at a discount to their intrinsic value, measured through pricetoearnings, pricetobook, and discounted cashflow models.
3. Sector diversification: Exposure across key Indian sectorsinformation technology, consumer discretionary, financial services, healthcare, and industrialsto avoid concentration risk.

FixedIncome Component Managing Credit & Interest Rate Risk

The debt side of the portfolio emphasizes highquality issuers. Core holdings typically include:

• Indian government securities (GSec) with varying maturities.
• Highly rated corporate bonds (AAAAA) from sectors such as utilities, telecommunications, and consumer staples.
• Moneymarket instruments for liquidity and shortterm cash management.

Interestrate risk is mitigated by maintaining a short to medium duration profile (average duration 24 years) and by using strategic laddering across maturities.

Performance Overview

Below is a summary of the funds performance over various time frames (all figures are annualised returns, net of fees):

While the fund has slightly underperformed its blended benchmark in most periods, the reduced volatility and smoother return path have made it attractive for riskaverse investors seeking exposure to India.

Risk Profile & Volatility Measures

• Standard deviation (3year): 12.2% vs. 18.5% for a pure Indian equity fund.
• Beta (relative to NIFTY 50): 0.68, indicating lower sensitivity to market swings.
• Maximum drawdown (20202022): 22%, compared with 35% for many equityonly funds.

These metrics highlight the funds ability to temper downside risk while still participating in the upside of Indias growth story.

Who Should Consider Investing?

The HSBC Managed Solutions India Moderate Fund is suitable for:

• Investors who are bullish on India but wish to avoid the full volatility of an equityonly vehicle.
• Those with a mediumtolongterm investment horizon (5+ years) and a moderate risk tolerance.
• Institutional clients seeking diversified exposure to emerging markets within a single, actively managed product.
• Retail investors looking for a setandforget balanced fund that is professionally rebalanced.

Tax Considerations

Because the fund is domiciled offshore (typically in the Isle of Man or Ireland), taxation is generally limited to the investors country of residence. U.S. investors may be subject to U.S. tax on dividends and capital gains, while nonU.S. investors should consult local tax advisors regarding foreign investment income.

How to Invest

Investors can purchase shares directly through HSBCs online platform, through authorized financial advisers, or via brokerage houses that carry the funds share classes. The process typically involves:

1. Opening an investment account with a participating platform.
2. Completing the necessary KYC (KnowYourCustomer) documentation.
3. Funding the account with the minimum required amount.
4. Placing a purchase order for the HSBC Managed Solutions India Moderate Fund (ticker: HSMIUSD or HSMIGBP).

Key Benefits Summary

• Balanced exposure to Indias highgrowth equity market and stable fixedincome sector.
• Active management that adjusts asset allocation in response to macroeconomic signals.
• Lower volatility compared with pure equity funds, as demonstrated by a beta of <0.7.
• Access to professional research and a disciplined valuation approach.
• Daily liquidity and transparent pricing.

Potential Drawbacks

• Returns may lag a pure equity fund during strong bull markets.
• Currency risk: The funds performance is influenced by INR/USD movements.
• Expense ratio is higher than a passive index fund (though comparable to other actively managed balanced funds).

Recent Developments & Outlook

In the latest quarterly update (Q12024), the funds managers highlighted three themes shaping the Indian market:

1. Infrastructure spending: Government initiatives on highways, railways, and renewable energy are expected to boost related sectors.
2. Digital transformation: Continued adoption of cloud services, fintech, and ecommerce creates growth opportunities for technology and consumer companies.
3. Monetary policy stability: The Reserve Bank of Indias focus on maintaining inflation within its target band provides a predictable environment for debt markets.

Accordingly, the fund has increased its allocation to infrastructurelinked equities while maintaining a defensive stance in the bond segment to protect against any unexpected rate hikes.

Conclusion

The HSBC Managed Solutions India Moderate Fund offers a wellstructured, actively managed solution for investors seeking to participate in Indias dynamic growth story without taking on the full volatility of an equityonly approach. By blending highquality Indian stocks with a solid foundation of government and corporate bonds, the fund strives to deliver consistent, riskadjusted returns over a mediumtolongterm horizon. Investors who align with the funds moderate risk profile and have confidence in Indias longrun economic prospects may find this product a compelling addition to a diversified global portfolio.