Review: HSBC Emerging Markets Fund NFO

The HSBC Emerging Markets Fund is currently open with it’s NFO or New Fund offer period. The purpose of this fund is to invest in the OVERSEAS emerging markets equity and mutual funds and generate capital appreciation. The concept of the fund is based upon the “Emerging Markets give better returns” – primarily targeted to 4 BRIC countries –namely Brazil, Russia, India and China. The fund, at its sole discretion, may also invest a part of money in domestic equities and money market financial instruments.

Claims of Benefits: HSBC claims that this kind of scheme gives overseas exposure to the domestic investors, who may not be able to invest overseas directly. However, the global picture looking highly bleak, who knows which markets perform in which way.

Here are the key features of this NFO from HSBC Emerging Markets Fund.

Type of Scheme :An open-ended scheme, meaning any number of units can be created and sold as and when required

Overseas Securities Exposure :Up to 100%

Benchmark Index :BSE 200 & MSCI Emerging Markets Index

Offer Period :28 Jan to 25 Feb 2008

Offer Price :Rs 10 per unit plus applicable load

Options :Dividend (Reinvestment/Payout) and Growth

Minimum Application Amount :Rs 10,000

Minimum Additional Investment :Rs 1,000 and in multiples of Re 1 thereafter

Liquidity :Daily redemption available at Repurchase NAV subject to entry/exit load, if any

SIP :Available during NFO and on an ongoing basis.
Entry Load** :2.5% for investments/switch in# below Rs 5 crores, otherwise Nil

Exit Load :1% for investments below Rs.5 crores, if redeemed/switched out# within 1 year from the date of investment, otherwise Nil

Cheques to be drawn in favour of : “HSBC Emerging Markets Fund” or “HEMF”

They have given a comparison graph with the existing funds of HSBC with that of the world standard Morgan Stanley Capital index (MSCI Index) of Emerging Markets. The graph is copied below.

However, no information is provided about how they have calculated the returns – whether it is before the fund administration and management charges and entry exit loads or after the charges.

No tax benefit is available with HSBC Emerging Markets Fund. Investors who firmly believe that HSBC fund management will be able to deliver better returns by managing and investing their money in the so called emerging markets can take a bet!

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