The fund is to invest principally in Indian government and corporate bonds, denominated in rupees. It also plans to invest in bonds issued in different currencies that have a strong connection to India or cash hedged back into rupees, and will have synthetic exposure to Indian bonds through structured notes too.
Andy Clark, HSBC’s head of wholesale for Europe, the Middle East and Africa, explained that the fund ‘reflects HSBC’s ability to combine vast expertise and local presence to offer clients exposure to interesting and innovative asset classes’.
The UCITS-compliant fund will be domiciled in Luxembourg and run by Gordon Rodrigues, the head of Asian rates, foreign exchange and liquidity at HSBC. The firm’s Asian fixed-income team will support him.
Rodrigues aims to meet the underlying net yield of the domestic bond market, presently 8.38 per cent, and expects to include investment-grade and high-yield bonds.
He argued that ‘although underdeveloped in relation to the size of India’s economy, the bond market is currently sizeable, deep and liquid and has potential to grow substantially in terms of size and opportunity in the coming years. The economy, although facing challenges, could potentially outgrow the developed world’.
Rodrigues is currently the manager of HSBC’s Asian Currencies Bond fund, which according to FE Analytics has returned 2.93 per cent in the year to date against a sector average of 0.72 per cent.
The base currency of the fund will be US dollars, although the underlying exposure will be to the Indian rupee.
The minimum investment is $5,000 (£3,185) or equivalent, and the annual management charge is 1.1 per cent.