HEAD-TO-HEAD: HSBC versus JP Morgan

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Investment process

Although both the HSBC and JP Morgan funds are focused on Asia corporate bonds, the products have different investment processes, according to Ge.

Asset allocation (%)

Source: Morningstar Direct

The HSBC fund is focused on investing in hard currency bonds, while the JP Morgan product has a more flexible mandate of investing across the different Asian bond sub-asset classes.

The HSBC product aims to outperform its benchmark index, the Markit iBoxx Asian USD Bond Index, with a tracking error range of 0%-3%, according to Ge. Although the fund has the flexibility to invest up to 30% in local currency and high yield bonds, this exposure has been typically under 10%.

At the moment, local currency exposure is at 1%.

The fund also limits its duration to plus or minus one year of the benchmark, Ge added.

“It is more of a benchmark-aware product in the hard currency space,” he said, adding that the product is more of a “core offering” Asia corporate bond product.

Turning to the JP Morgan fund, Ge said that it invests in the different sub-asset classes in the Asia bond universe. For example, it can invest up to 25% in hard currency Asia sovereign bonds, up to 50% in local currencies, 25%-100% in non-government bonds and up to 35% in convertible bonds.

On the average, the product has historically invested around 15% of its assets in local currency bonds, according to Ge.

The managers of the HSBC fund also have the flexibility to adjust duration to in the range of 1.5 – 5 years.

Ge added that the JP Morgan product does not have any benchmark index.

“The fund has a benchmark-free, best ideas mandate to deliver returns,” Ge said.

However, although the JP Morgan fund is flexible, the managers aim to limit annual volatility to around 2%-5%, Ge noted.

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