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Derivatives

HSBC To Buy Equity Call Options

HSBC Asset Management plans to buy over-the-counter equity call options to structure a guarantee on a global sector equity fund it will launch at the end of the month. Bill Maldonado, head of the tactical investment unit in London, said the fund manager will buy calls on baskets of stocks in four underlying sectors: financials, pharmaceuticals, energy and healthcare.

The fund, dubbed the HSBC Global Sectors Capital Guaranteed Fund, will invest in zero-coupon bonds to structure the guarantee and buy four-year lookback call options with dollar payouts with the remaining money. Maldonado declined to further detail the structure. He said HSBC will be the primary counterparty but the asset manager is free to use other firms.

HSBC has not set a target size for the fund, but Maldonado said the fund manager launched four funds in Hong Kong last year for a total of USD1 billion and he expects this fund will reach a similar size. The dollar-denominated fund is being marketed to Asian retail and private client investors through the asset manager's Hong Kong office.

HSBC Asset Management has over USD115 billion in assets under management.

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