HEAD-TO-HEAD: Blackrock vs HSBC

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Investment strategy

Both funds invest in hard currency-denominated Asian bond funds, but their investment strategies are different in terms of the amount of risk they take.

Both funds have the flexibility to invest up to 15% of their assets in local currency bonds.

“The Blackrock Tiger Asian Bond Fund has historically used that flexibility more widely, especially when the manager sees opportunities to invest in local currency debt,” Yew said.

Historically, the Blackrock fund has invested an average of 10%-15% of its assets in local currency debt, while the HSBC fund has invested an average of 5% in local currency debt, he added.

“The [HSBC] fund has underutilised that risk budget.”

Yew said that the Blackrock fund also deviates more from its benchmark index than the HSBC fund.

The benchmark index of the Blackrock fund is the JP Morgan Asia Credit Index, while the HSBC fund’s benchmark index is the Markit iBoxx USD Asia Bond. Although they are different indices, their components are similar, Yew noted.

“The Blackrock fund had some pretty sizable underweight positions, such as in China,” Yew said.

Country allocations

Source: Blackrock and HSBC’s fund factsheets

Current tracking error for the HSBC fund is 0.5% versus its benchmark on a three-year basis, according to the fund factsheet. (The Blackrock tracking error is not available).

“For the HSBC fund, I wouldn’t say it is a benchmark hugger, but the tracking error of the fund historically has been at the lower end of its 0%-3% target range,” Yew said.

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