HSBC Global Asset Management is offering a 2.5-year fixed term bond fund to Singapore retail investors.
The Global Corporate Fixed Term Bond 2022 aims to generate a monthly dividend and to return net assets upon the bond’s maturity in January 2022. The dividend is not guaranteed and may be paid out of capital, which will result in capital erosion and a reduction in net asset value, said HSBC.
It added that the final portfolio value will depend on the number of defaults and reinvestment rates over the life of the fund, and there is no guarantee of income and repayment of the principal amount invested initially.
According to HSBC, the fund is broadly diversified across investment grade and high yield bonds in developed markets and emerging markets, with a maximum of 30 per cent of its assets to be invested in non-investment grade bonds to achieve an average rating of BBB-.
It will have investments in North America, Europe and a “considerable weighting in Asia in terms of asset allocation”, as HSBC sees attractive opportunities to be expected across the region.
A robust default analysis process is in place to monitor the underlying securities and ensure credit risk is managed, the asset manager said.
Just like traditional bond funds, the fixed term bond fund will be managed by an investment team and has a lower minimum subscription threshold than individual bonds.
Singapore retail investors can subscribe for the bond fund until June 25. The fund will begin trading on the same day.
With a base currency in US dollars, the fund also offers share classes in Singapore dollar, yuan and Australian dollar. The minimum investment amount is US$1,000, S$1,000, 5,000 yuan and A$1,000 for the respective currencies.
For investors who wish to redeem the fund prior to the maturity date, swing pricing of up to 2 per cent of the redemption amount will apply to protect existing investors against transaction costs, said HSBC.
Puneet Chaddha, CEO and head of Southeast Asia, HSBC Global Asset Management, said HSBC offered this fund in response to strong investor demand for higher yield, and that it is the first time HSBC is extending fixed maturity bond funds to retail investors.
“The short tenor of this fund offers investors better predictability of potential income for the foreseeable future as typically shorter time to maturity can help to reduce impact of market volatility,” he added.