HSBC Asset Management last week bought an equity basket call option to structure a three-year guaranteed fund. Mark Dickson, global head of product development in London, said the call option gives the fund equal exposure to 25 mainly health care and financial services companies in North America, Japan and Europe. The basket includes AstraZeneca, Citigroup and Yamanouchi Pharmaceutical. Dickson said it chose these companies and other components of the basket because they are expected to appreciate as a result of an increase in the percentage of elderly people in the developed world.
The fund, named the HSBC Global Demographics Capital Guaranteed Fund, is structured by investing approximately 80% of the investors' capital in zero-coupon bonds and using the remaining 20% to purchase a call option. The option gives investors 80% participation in the upside of the basket.
Dickson said the fund, which closed on Monday, was one of HSBC Asset Management's most successful. It raised USD651 million in the five-week subscription period, compared to USD284 million for the previous fund the asset manager launched in Hong Kong.
The fund is aimed at Hong Kong retail investors and has a minimum investment of USD5,000. The asset manager chose derivatives counterparties according to price, relationship and credit lines, according to Dickson. He added a lot of the business was done through HSBC because the bank offers the best combination of these criteria.