HSBC Global Asset Management (HSBC GAM) is hard-closing its HSBC GIF Asia ex Japan equity smaller companies fund to new subscriptions from all investors with effect from 10 May 2017.
The asset manager said this is as a result of “significant investor interest on the back of strong performance”. As a result, HSBC has capped the size of the fund to ensure that interests of existing investors are protected.
The fund, co-managed by Elina Fung and Alex Kwan since July 2012, primarily invests in companies in the bottom 25% by market capitalisation of the Asia ex Japan universe, which currently means companies with a market cap of $4bn or below. Strong investor demand has helped the fund reach AUM of $1.3bn.
Asia’s small cap universe by its nature is not the most liquid asset class and over the past five years there have been periods of volatility, resulting in challenging liquidity conditions. HSBC GAM has therefore taken the decision to hard close the fund in the best interests of existing investors. The measure is temporary and can be reversed if the AUM falls below the stated hard close threshold.
Stephen Kam, senior product specialist, Asian equities, HSBC GAM, commented: “As liquidity is generally much lower for companies in the small cap universe compared to the overall market, investment opportunities can become more limited as subscriptions to the fund increase.
“We have seen great investor interest in the fund on the back of strong performance and therefore have capped the size of the fund to ensure we protect the interests of our existing investors. The decision also allows our investment team to continue to invest in similar opportunities that have helped generate the strong returns seen in the past.”