Importance of Due Diligence For Index Tracker Funds and ETFs

For professional clients only

Weighting methodology

Index

Rebalancing Liquidity

Select an Index

Index-based funds may differ from active funds in

Index coverage

Capped exposure

the way they are managed, structured and traded

Each index has its own construction methodology

Some markets are dominated by a few large companies

but products from different providers may, just

which determines which stocks are included from

and, as a result, the market cap indices that track

as with active funds, perform differently. In order

their respective investment universe. Different index

these markets may have significant exposure to these

to incorporate high quality passive funds into

providers covering the same market would not normally

companies. Some providers may opt for a ‘capped’

a portfolio, advisers need to have a robust due

have the same stock selection criteria. Some equity

version of these indices, which limit the percentage

diligence process for selecting index-based funds,

index providers would exclude certain types of shares,

exposure to their largest constituents. This allows the

just as they do for active funds.

while others will not or classify sectors differently from

provider to offer a more diversified exposure to these

As awareness of problems such as the issuer’s

other providers. Some indices may exclude whole

markets. HSBC Global Asset Management has opted

countries from their scope, while other providers will

for this type of index exposure for both the HSBC MSCI

include them. The most commonly used index selection

Russia Capped UCITS ETF and the HSBC MSCI Mexico

criteria takes into account market capitalisation of the

Capped UCITS ETF.

concentration risk becomes more prevalent, we expect to see better due diligence used in the selection of passive funds. Concentration risks relate to having UCITS Replication Cost Tracking difference / Tracking error

Fund

a high proportion of assets invested with a single

underlying securities.

fund provider.

For example, FTSE and MSCI differ in the way they

“

Fund selection based on strong risk assessment and due diligence, rather than going for a ‘default provider’, will ultimately lead to better outcomes

AUM

for end investors.

Independent ratings

”

In this publication, we will cover some of the most important questions that, in our view, intermediaries and fund buyers should address as part of their due diligence framework for passive fund selection.

Client centric

Making the right choice

Risk management AUM growth IFA support Focus on growth Experience & brand

INDEX

Index coverage

Due Diligence

classify emerging market countries (EMs), with South Korea categorised as developed markets by FTSE but as emerging markets by MSCI.

an index’s focus and “Understanding construction allows you to pinpoint the exact exposure you need for a client’s portfolio.

”

As part of passive fund selection, due diligence is

Provider

typically conducted in three stages. First, suitable

For instance, with the S&P 500 Index representing

indices are identified, then a shortlist of index funds

about 80% of US market capitalisation1, a question

tracking them is created, and finally the fund is selected

can be asked about what will be achieved by going

based on the choice of a provider.

any broader than S&P 500?

The different considerations at each of these levels are weighted depending on advisers’ views on the following

Index weighting methodology

key factors.

Different index weighting methodologies can lead to differences in performance and risk-return characteristics among seemingly similar indexes. The S&P 500 Index is an example of the most commonly used index methodology, which is based on market capitalisation. There are other index weighting methodologies and it is important to understand what this means in the context of your overall investment objectives.

2

3 1  Source: Standard & Poor’s, November 2016

A Fund Shortlist Index re-balancing: how often?

Liquidity of the underlying market

Is it a UCITS fund?

The composition of indices is reviewed periodically

As part of their index construction process, providers

Most retail funds in Europe are UCITS compliant. UCITS

to ensure that they remain representative of the their

often apply a filter to exclude stocks with low liquidity

was enacted to create a single European standard for

objectives. For example, some stocks are dropped from

however it is still important for investors to consider

consumer protection in respect to fund composition.

a market capitalisation index in the course of rebalancing

liquidity when selecting an index.

In Europe, but also in regions beyond its borders, it is

if their size falls bellow or rises above the respective threshold of this index. The frequency of index rebalancing is part of an index’s calculation methodology. The more frequently an index rebalances and the larger the resulting underlying movements are, the higher the turnover rate is for that particular index. If an index has a high turnover rate, any fund aiming to track the performance of that index

considered a quality seal, as it sets very high common

When selecting a passive fund, investors should

standards that are embedded in the European regulatory

consider the level of liquidity (availability) of the

framework. Therefore, it makes good sense to select

underlying index’s constituent securities.

index-based funds that are UCITS compliant.

At the most liquid end of the spectrum are listed shares of large global companies, while highly illiquid assets include penny stocks and shares of very small companies that are traded “by appointment”.

will be faced with higher trading costs. As trading costs

Liquidity can fall due to market conditions or stock-specific

come out of fund performance, fund returns will be

factors, creating a risk for investors. That risk can impact

negatively impacted.

an asset’s price.

Physical or Synthetic Replication?

Overall cost

The most straight-forward way to replicate an index

When it comes to comparing fund costs, it is

is physical replication. In this instance, an index fund

increasingly based on passive funds’ Total Cost of

manager purchases the underlying securities of an index.

Ownership (TCO). This way, a comparison takes into account not only management fees and the Ongoing

An alternative to this is synthetic replication, whereby a fund manager instead buys a swap from a third party. A swap is a derivative security providing the return from a given index in exchange for a fee and any returns

Charges Figure (OCF), but also transaction costs. The total cost of ownership comprises: of holding the fund – (which effectively are

FUND

u  Costs 

on collateral.

reflected by the fund’s tracking difference) consist of the OCF and the costs incurred within the fund, such as rebalancing costs, taxes, dividend reinvestment/

“

There are concerns that the risks associated with synthetic funds – the most important of which is counterparty risk – can make them a less attractive investment option. It means that investors may not be compensated for this type of risk.

”

cash drag and any costs associated with the optimisation, if applicable. u  Costs

of trading the fund – where applicable, include

platform or brokerage transaction fees and taxes.

TCO shows that investing “The  attracts a number of expenses not included in the headline  price (OCF).

”

Therefore, we believe that when looking at fund costs, cost comparisons should be based on the TCO. For index-based funds, the TCO comprises the tracking difference, which signifies the sum of all costs and income within the fund, and trading costs.

4

5 5

££

££

Co

st?

X E D IN

kin ac Tr g Di

n re ffe

D

N

FU

they never mimic their index exactly. Two measures

assets, which may be partly due to the nature of the

used to gauge this discrepancy in returns are ‘tracking

underlying indices they track. Significant assets illustrate

difference’ and ‘tracking error’. These measures should

investor interest in an index-based fund, but also its

be considered together as tracking difference looks at

underlying market. Moreover, index-based funds that

how well an index is replicated over a given period of

track more specialised markets (such as an emerging

time, while tracking error, being a measure of volatility,

market country index) tend to have a lower AUM than a

gives an idea how consistent that replication is.

large developed country, regional or a global stock index.

Tracking difference compares the fund’s return a period of time. For example, if an index tracker delivered 8.5% over a period of time compared to the underlying index’s 10% over the same period, the tracking difference in this instance will be -1.5%.

demand. Moreover, new funds may be smaller in size but at the same time offer a better solution than some of its larger peers.

Securities lending Many fund providers use stock lending which helps

Tracking error is a measurement of risk that defines

to reduce fund costs by lending some of the portfolio

how consistent the return difference between

holdings to a third party for a fee. However, this carries

the fund and its benchmark index has been over

counterparty risk, as the stock may be lost if the

time. It is calculated as the annualised standard

borrower goes out of business.

deviation of the difference between the fund’s daily

Some providers indemnify their investors against

performance and that of its underlying index.

this risk while others don’t, so a review of stock

It should be remembered that all measures of tracking quality are backward looking and as such can’t be relied on to forecast future performance.

Different pricing points

6

This is because of the size of the underlying market and

nd ? Fu ting Ra

to the performance of its underlying index over

? ce

Index-based funds attract different volumes of investor

?

Assets under management (AUM)

Passive funds’ dealing and trading fees mean that

M AU

Tracking difference and tracking error

lending practices should form an important part of any due diligence process. If a fund is involved in stock lending then due diligence should also address that point in detail. Questions should be asked about the type of collateral that is being offered and the over collateralisation applied. What is the state of financial

When comparing tracking errors of different funds,

security under any stress testing? Moreover, securities

investors should bear in mind that different providers

lending adds an extra layer of complexity to the fund’s

may price their index funds at different times of the

investment process and costs. It can also be useful to

day. It means that the figures may need to be adjusted

look at how the fund provider profits from securities

before a fair comparison is made. More information can

lending alongside the fund and consider how this may

be requested from the provider.

effect their securities lending policies.

Global Financial Crisis brought about “The the realisation that stock lending carried some additional risks that might have been underestimated in the past and could result in additional losses.

”

7

Select a Provider Independent Ratings As with active funds, there are a number of independent

still a relatively new area for ratings agencies and there

ratings agencies that assess passive funds’ relative

is still no common industry standard of how it should

performance, together with the strength and quality of

be approached. Therefore, it is important to review the

their investment processes.

rating methodology and data used to ensure that it

Independent ratings are designed to help investors decide which funds have the greatest potential to deliver

Putting clients first

How does the asset manager support IFAs?

It may be argued that, being quantitatively-driven

Ask yourself, how strong is the asset manager at

investment vehicles, passive funds are only as good as

supporting their clients, such as providing thought

the processes and technology on which they are built.

leadership, support and briefings for advisers?

The Fund provider’s track record and reputation offer

Does the fund provider have a vision about its place in

an effective reflection of their capabilities, knowledge

meets your expectations.

the evolving industry and a long-term strategy for how

and experience.

Please see our publication on index fund ratings.

best to support their clients?

Any decision to invest in the Fund should take into

the best performance. However, index-based funds are

Having a clear vision and a voice helps underline

account the provider’s approach to conduct risk

the provider’s commitment to index investment

and corporate governance.

products. This would mean that the provider takes

Independent ratings for passive funds

the necessary steps to ensure that it offers products

Agency

Name of Rating

Types of funds rated

Defaqto

Diamond Rating

Index trackers (OEICs and unit trusts)

Dynamic Planner

ACE Fund Rating

Index trackers (OEICs and unit trusts)

FE (Financial Express)

Crown Rating

Index trackers (OEICs and unit trusts) and ETFs

Quantitative factors

‘Star’ rating

Index trackers (OEICs and unit trusts) and ETFs

Quantitative factors

Morningstar

Rayner Spencer Mills

Analyst Rating (Gold, Silver, Index trackers (OEICs and unit trusts) Bronze, Neutral and Negative) RSMR Rating (Blue)

Index trackers (OEICs and unit trusts)

Based on Combination of quantitative and qualitative factors Combination of quantitative and qualitative factors

“

You need to question how client-centric your fund provider is. How much work is done to make investment solutions transparent and easy to understand for investors? Does the firm offer products tested with such organisations as the Wisdom Council, a consumer research agency?

that answer investors’ requirements and are right for market conditions.

”

Qualitative factors Combination of quantitative and qualitative factors

Commitment on product development and growth Does the asset manager operate in both ETFs and tracker funds by the same team – demonstrating collaborative expertise and commitment to index investing? Is the provider continually developing its range? Due diligence should also look at the strength of the provider’s brand and its financial position. How have the assets grown over the previous years? How does the firm manage risk?

PROVIDER

8

9 9

Risk management Asset managers must be judged on their ability not

Other important risk factors that asset managers always

only to monitor but also to control a range of risks that

need to take into consideration are regulation and tax

may affect their passive funds’ ability to track indices

regimes, which may span many countries and continents

effectively. Risk management is a key consideration not

depending on the investment universe of a given fund.

only during portfolio construction but throughout the life

Changes to tax and regulation may have an impact,

of the fund.

sometimes considerable, on the performance of the

Ongoing risk management includes the analysis of performance attributions and exposures to different parts

Index

underlying funds.

of the underlying market. Asset managers also look at

Experience and brand

the impact of index rebalancing, currency exchange rate

The track record and reputation of the fund provider

exposure and corporate actions, such as mergers and

offer an effective reflection of the asset manager’s

acquisitions, stock splits, rights issues, spin-offs or the

capabilities, knowledge and experience.

receipt of interest and dividends. Many fund providers use stock lending which helps to reduce fund costs by lending some of the portfolio holdings to a third party for a fee. However, as we argued earlier, it carries some risk and some providers do not indemnify against it.

Fund

Impact of corporate actions

Performance attributions analysis

Index rebalancing impact

Risk Management

Impact of index rebalancing

Provider Regulation and tax regimes

Sector exposure analysis

10

11

HSBC Index Tracker Fund Range Fund Name

Benchmark

Tracking Method

HSBC American Index Fund

S&P 500 Index

Full

HSBC European Index Fund

FTSE Developed Europe ex UK Index

Full

HSBC FTSE 100 Index Fund

FTSE 100 Index

Full

HSBC FTSE 250 Index Fund

FTSE 250 Index

Full

HSBC FTSE All Share Index Fund

FTSE All-Share Index

Optimised

HSBC FTSE All-World Index Fund

FTSE All-World Index

Optimised

HSBC Index-Linked Gilt Index Fund

FTSE Actuaries UK Index-Linked Gilts Index

Full

HSBC Japan Index Fund

FTSE Japan Index

Full

HSBC Pacific Index Fund

FTSE Asia Pacific Ex. Japan Index

Full

HSBC Sterling Corporate Bond Index Fund

Markit iBoxx GBP Non-Gilts Index

Optimised

HSBC UK Gilt Index Fund

FTSE Actuaries UK Gilts All Stocks Index

Full

Lower minimum investments will apply to business done via platforms. For direct business with HSBC Global Asset Management, a minimum of £1million applies.

12

Ongoing Charges Figure (OCF)*

Share Class

ISIN

0.08

Inc

GB00B80QG490

0.08

Acc

GB00B80QG615

0.10

Inc

GB00B80QGD89

0.10

Acc

GB00B80QGH28

0.18

Inc

GB00B80QD042

0.18

Acc

GB00B80QFR50

0.18

Inc

GB00B80QFZ35

0.18

Acc

GB00B80QG052

0.07

Inc

GB00B80QFW04

0.07

Acc

GB00B80QFX11

0.20

Inc

GB00BMJJJG09

0.20

Acc

GB00BMJJJF91

0.17

Inc

GB00BYV9WL85

0.17

Acc

GB00BYVCCV79

0.21

Inc

GB00B80QGM70

0.21

Acc

GB00B80QGN87

0.25

Inc

GB00B80QGR26

0.25

Acc

GB00B80QGT40

0.17

Inc

GB00BYV9W854

0.17

Acc

GB00BYV9WC94

0.20

Inc

GB00B80QG276

0.20

Acc

GB00B80QG383

* C share class accumulation units. Please refer to the regulatory disclosures overleaf.

Fund launch date

31/10/1988

14/01/1989

30/09/1994

07/10/1997

26/03/1990

26/09/2014

15/07/2016

14/01/1989

20/11/1998

24/10/2016

07/06/2010

Initial Charge

Domicile

0%

UK

13

HSBC Exchange Traded Fund (ETFs) Range Stock Exchange

Bloomberg ticker

Reuters ticker

HSBC MSCI PACIFIC ex JAPAN UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMXJ LN HMXD LN MXJ FP HMXJ SW H4ZH GY & GR

HMXJ.L HMXD.L MXJ.PA HMXJ.S H4ZH.DE

HSBC MSCI EUROPE UCITS ETF

LSE GBP NYSE Euronext Paris SIX Swiss USD SIX Swiss EUR Deutsche Borse

HMEU LN HEU FP HMEU SW HMEUEUR SW H4ZE GY & GR

HMEU.L HEU.PA HMEU.S HMEUS.S H4ZE.DE

HSBC EURO STOXX 50 UCITS ETF

LSE GBP NYSE Euronext Paris SIX Swiss USD SIX Swiss EUR Deutsche Borse

H50E LN 50E FP H50E SW H50EEUR SW H4ZA GY & GR

H50E.L 50E.PA H50E.S H50EE.S H4ZA.DE

HSBC MSCI WORLD UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMWO LN HMWD LN WRD FP HMWO SW H4ZJ GY & GR

HMWO.L HMWD.L WRD.PA HMWO.S H4ZJ.DE

HSBC S&P 500 UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HSPX LN HSPD LN HHH FP HSPX SW H4ZF GY & GR

HSPX.L HSPD.L HHH.PA HSPX.S H4ZF.DE

HSBC FTSE 100 UCITS ETF

LSE GBP NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HUKX LN UKX FP HUKX SW H4ZB GY & GR

HUKX.L UKX.PA HUKX.S H4ZB.DE

HSBC MSCI USA UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMUS LN HMUD LN MUS FP HMUS SW H4ZD GY & GR

HMUS.L HMUD.L MUS.PA HMUS.S H4ZD.DE

HSBC MSCI JAPAN UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD SIX Swiss JPY Deutsche Borse

HMJP LN HMJD LN MJP FP HMJP SW HMJPJPY SW H4ZC GY & GR

HSBC FTSE 250 UCITS ETF

LSE GBP

HMCX LN

FUND NAME

Trading Base Currency1 Currency2

OCF3

ISIN

Sedol

Dividends

UK Reporting Status4

Replication method

UCITS IV

Registration

0.40%

IE00B5SG8Z57 IE00B5SG8Z57 IE00B5SG8Z57 IE00B5SG8Z57 DE000A1C22P6

B5SG8Z5 B3Z8N00 B60XHD2 B5P4324 B4WHBL4

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

0.20%

IE00B5BD5K76 IE00B5BD5K76 IE00B5BD5K76 IE00B5BD5K76 DE000A1C22L5

B5BD5K7 B5MLFJ9 B4V4L83 B3R48F6 B4WZVJ6

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.05%

IE00B4K6B022 IE00B4K6B022 IE00B4K6B022 IE00B4K6B022 DE000A1C0BB7

B4K6B02 B4KTPN2 B4T2156 B3RNLN2 B4WNQH3

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

0.15%

IE00B4X9L533 IE00B4X9L533 IE00B4X9L533 IE00B4X9L533 DE000A1C9KL8

B5BD198 B4X9L53 B4YCZD7 B5W4MY2 B4VBPV5

Quarterly

Yes

Physical – Optimisation Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

0.09%

IE00B5KQNG97 IE00B5KQNG97 IE00B5KQNG97 IE00B5KQNG97 DE000A1C22M3

B5KQNG9 B64XYN7 B5T03T5 B4Y3DG9 B54FQ74

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

0.07%

IE00B42TW061 IE00B42TW061 IE00B42TW061 DE000A1C0BC5

B42TW06 B4NQM28 B55B529 B51D2P1

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.30%

IE00B5WFQ436 IE00B5WFQ436 IE00B5WFQ436 IE00B5WFQ436 DE000A1C22K7

B5WFQ43 B3Z7TR6 B57D976 B5103K4 B4YRY80

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

B5VX756 B4V1TC4 B5LRD94 B50ZTJ1 B7J4WR2 B4VZP39

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

B64PTF0

Quarterly

Yes

Physical – Replication

Compliant

UK, FR, IE, NL, ES

DEVELOPED MARKETS – REGIONAL EXPOSURE

USD

GBP USD EUR USD EUR

EUR

GBP EUR USD EUR EUR

EUR

GBP EUR USD EUR EUR

USD

GBP USD EUR USD EUR

USD

GBP USD EUR USD EUR

GBP

GBP EUR USD EUR

USD

GBP USD EUR USD EUR

HMJP.L HMJD.L MJP.PA HMJP.S HMJPJPY.S H4ZC.DE

USD

GBP USD EUR USD JPY EUR

0.19%

IE00B5VX7566 IE00B5VX7566 IE00B5VX7566 IE00B5VX7566 IE00B5VX7566 DE000A1C0BD3

HMCX.L

GBP

GBP

0.35%

IE00B64PTF05

DEVELOPED MARKETS – SINGLE COUNTRY EXPOSURE

14

15

OCF3

ISIN

Sedol

Dividends

UK Reporting Status4

Replication method

UCITS IV

Registration

GBP USD EUR CAD USD EUR

0.35%

IE00B51B7Z02 IE00B51B7Z02 IE00B51B7Z02 IE00B51B7Z02 IE00B51B7Z02 DE000A1JF7N6

B57JD27 B51B7Z0 B4X4T87 B5M79V7 B592VC0 B4XWHP4

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

USD

GBP USD EUR

0.40%

IE00B5L01S80 IE00B5L01S80 DE000A1JXC78

B5L01S8 B3LFHB4 BDC7PY8

Quarterly

Yes

Physical – Replication

Compliant

USD

GBP USD USD EUR

0.40%

IE00B5SSQT16 IE00B5SSQT16 IE00B5SSQT16 DE000A1JXC94

B5ZPRQ9 B5SSQT1 B5L27B9 BDC7Q23

Quarterly

Yes

Physical – Optimisation Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, IE, CH, AT

USD

GBP USD USD EUR

0.40%

IE00B5SSQT16 IE00B5SSQT16 IE00B5SSQT16 DE000A1JXC94

B5ZPRQ9 B5SSQT1 B5L27B9 BDC7Q23

Quarterly

Yes

Physical – Optimisation Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, IE, CH, AT

USD

GBP USD EUR USD EUR

0.60%

IE00B5LP3W10 IE00B5LP3W10 IE00B5LP3W10 IE00B5LP3W10 DE000A1C22Q4

B5LP3W1 B3XMR13 B5KTC94 B59MNV3 B4TB4Y3

Semi-annual

Yes

Physical – Optimisation Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

USD

GBP USD EUR USD EUR

0.60%

IE00B4TS3815 IE00B4TS3815 IE00B4TS3815 IE00B4TS3815 DE000A1JF7T3

B56T0F0 B4TS381 B4T3SB4 B4RDC58 B4PJFC6

Quarterly

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

USD

GBP USD EUR USD

0.60%

IE00BBQ2W338 IE00BBQ2W338 DE000A1W2EK4 IE00BBQ2W338

BBR6WH8 BBQ2W33  BDC7Q34 BKRC9F6

Accumulated

Yes

Physical – Optimisation Replication

Compliant

UK, FR, DE, IT, NL, SW, CH, IE, AT

USD

GBP USD USD EUR

0.60%

IE00B5LJZQ16 IE00B5LJZQ16 IE00B5LJZQ16 DE000A1JXC86

B62NTH8 B5LJZQ1 B60XPB6 BDC7Q12

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE, AT

USD

GBP USD EUR USD EUR

0.60%

IE00B44T3H88 IE00B44T3H88 IE00B44T3H88 IE00B44T3H88 DE000A1JF7LO

B44T3H8 B40S3X5 B4KRT78 B3T97G3 B3T3XS9

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

USD

GBP USD USD EUR

0.60%

IE00B3S1J086 IE00B3S1J086 IE00B3S1J086 DE000A1JF7R7

B430TV8 B3S1J08 B3SLK27 B44JV85

Semi-annual

Yes

Physical – Replication)

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

Trading Base Currency1 Currency2

FUND NAME

Stock Exchange

Bloomberg ticker

Reuters ticker

HSBC MSCI CANADA UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss CAD SIX Swiss USD Deutsche Borse

HCAN LN HCAD LN HCAN FP HCANCAD SW HCAN SW H4ZR GY & GR

HCAN.L HCAD.L HCAN.PA USD HCANCAD.S HCAN.S H4ZR.DE

HPRO LN HPRD LN H4ZL GY & GR

HPROP.L HPRD.L H4ZL.DE

HSBC MSCI EMERGING MARKETS UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HMEF LN HMEM LN HMEF SW H410 GY & GR

HMEF.L HMEM.L HMEF.S H410.DE

HSBC MSCI EMERGING MARKETS UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HMEF LN HMEM LN HMEF SW H410 GY & GR

HMEF.L HMEM.L HMEF.S H410.DE

HSBC MSCI EM FAR EAST UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMFE LN HMFD LN MEM FP HMFE SW H4ZI GY & GR

HMFE.L HMFD.L MEM.PA HMFE.S H4ZI.DE

HSBC MSCI EM LATIN AMERICA UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMLA LN HMLD LN HMLA FP HMLA SW H4ZW GY & GR

HMLA.L HMLD.L HMLA.PA HMLA.S H4ZW.DE

HSBC MSCI AC FAR EAST EX JAPAN UCITS ETF

LSE GBP LSE USD Deutsche Borse SIX Swiss USD

HMAF LN HMAD LN H411 GY & GR HMAF SW

HMAF.L HMAD.L H411.DE HMAF.S

HSBC MSCI RUSSIA CAPPED UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HRUB LN HRUD LN HRUB SW H4ZM GY & GR

HRUB.L HRUD.L HRUB.S H4ZM.DE

HSBC MSCI CHINA UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HMCH LN HMCD LN CNY FP HMCH SW H4ZP GY & GR

HMCH.L HMCD.L CNY.PA HMCH.S H4ZP.DE

HSBC MSCI TAIWAN UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HTWN LN HTWD LN HTWN SW H4ZU GY & GR

HTNT.L HTWD.L HTWN.S H4ZU.DE

DEVELOPED MARKETS – PROPERTY LSE GBP HSBC FTSE EPRA/NAREIT DEVELOPED UCITS ETF LSE USD Deutsche Borse

UK, FR, DE, IT, NL, ES, SW, IE

EMERGING MARKETS – REGIONAL EXPOSURE

EMERGING MARKETS – SINGLE COUNTRY EXPOSURE

16

17

FUND NAME

Stock Exchange

Bloomberg ticker

Reuters ticker

HSBC MSCI MALAYSIA UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HMYR LN HMYD LN HMYR SW H4ZV GY & GR

HMYRM.L HMYD.L HMYR.S H4ZV.DE

HSBC MSCI INDONESIA UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HIDR LN HIDD LN HIDR SW H4ZT GY & GR

HIDRI.L HIDD.L HIDR.S H4ZT.DE

HSBC MSCI KOREA UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HKOR LN HKOD LN HKOR SW H4Z9 GY & GR

HKOR.L HKOD.L HKOR.S H4Z9.DE

HSBC MSCI BRAZIL UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HBRL LN HMBR LN HBZ FP HBRL SW H4ZG GY & GR

HBRL.L HMBR.L HBZ.PA HBRL.S H4ZG.DE

HSBC MSCI MEXICO CAPPED UCITS ETF

LSE GBP LSE USD SIX Swiss USD Deutsche Borse

HMEX LN HMED LN HMEX SW H4ZS GY & GR

HMEX.L HMEDC.L HMEX.S H4ZS.DE

HSBC MSCI SOUTH AFRICA UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HZAR LN HZAD LN HZAR FP HZAR SW H4ZQ GY & GR

HZAR.L HZAD.L HZAR.PA HZAR.S H4ZQ.DE

HSBC MSCI TURKEY UCITS ETF

LSE GBP LSE USD NYSE Euronext Paris SIX Swiss USD Deutsche Borse

HTRY LN HTRD LN HTR FP HTRY SW H4ZK GY & GR

HSBC ESI WORLDWIDE EQUITY UCITS ETF

LSE GBP LSE USD

HSBC WORLDWIDE EQUITY UCITS ETF

LSE GBP LSE USD

Trading Base Currency1 Currency2

OCF3

ISIN

Sedol

Dividends

UK Reporting Status4

Replication method

UCITS IV

Registration

0.60%

IE00B3X3R831 IE00B3X3R831 IE00B3X3R831 DE000A1JF7S5

B4885P3 B3X3R83 B3RSM78 B3SR8W1

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.60%

IE00B46G8275 IE00B46G8275 IE00B46G8275 DE000A1JF7Q9

B40Y0X2 B46G827 B3X4ZQ0 B3V0C58

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.60%

IE00B3Z0X395 IE00B3Z0X395 IE00B3Z0X395 DE000A1JXC60

B3QHF77 B3Z0X39 B3SSPB2 BDC7PX7

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.60%

IE00B5W34K94 IE00B5W34K94 IE00B5W34K94 IE00B5W34K94 DE000A1C22N1

B431M67 B5W34K9 B5MSL81 B5NNMW6 B4YBZ89

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.60%

IE00B3QMYK80 IE00B3QMYK80 IE00B3QMYK80 DE000A1JF7P1

B3VQZM4 B3QMYK8 B3T7V76 B444WR6

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

0.60%

IE00B57S5Q22 IE00B57S5Q22 IE00B57S5Q22 IE00B57S5Q22 DE000A1JF7M8

B4WN004 B57S5Q2 B5WJDW2 B3QH9F3 B3XV3W3

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

B57QMP4 B5BRQB7 B50S183 B5BCP15 B5V7Y02

Semi-annual

Yes

Physical – Replication

Compliant

UK, FR, DE, IT, NL, ES, SW, CH, IE

USD

GBP USD USD EUR

USD

GBP USD USD EUR

USD

GBP USD USD EUR

USD

GBP USD EUR USD EUR

USD

GBP USD USD EUR

USD

GBP USD EUR USD EUR

HTRY.L HTRD.L HTR.PA HTRY.S H4ZK.DE

USD

GBP USD EUR USD EUR

0.60%

IE00B5BRQB73 IE00B5BRQB73 IE00B5BRQB73 IE00B5BRQB73 DE000A1H49V6

HEWA LN HEWD LN

HEWA.L HEWD.L

USD

GBP USD

0.25%

IE00BKZG9Y92 IE00BKZG9Y92

BKZG9Z0 BKZG9Y9

Quarterly

Yes

Replication

Compliant

UK

HWWA LN HWWD LN

HWWA.L HWWD.L

USD

GBP USD

0.25%

IE00BKZGB098 IE00BKZGB098

BKZGB10 BKZGB09

Quarterly

Yes

Optimisation

Compliant

UK

GLOBAL MARKETS – BROAD EXPOSURE

1. The currency in which the ETF is valued and the dividends are published.  2. The currency in which the ETF is traded in the relevant exchange.  3. Ongoing Charges Figure.  4. HSBC FTSE 100 UCITS ETF and the HSBC EURO STOXX 50 UCITS ETF had UK distributor status for the period from their launch until 31 December 2009. After this UK Reporting Fund status came into effect. All of our ETFs now have UK Reporting Fund status from 1 January 2010 or from the date of their launch if later.

www.etf.hsbc.com   l   03457 456 123   l   [email protected]

18

Please refer to page five for important information including risk warnings.

19

Contact For more information, please contact us: Email: [email protected]

Telephone: +44 (0) 207 024 0435

Website: www.assetmanagement.hsbc.com/passive

Important Information For Professional Clients only and should not be distributed to or relied upon by Retail Clients. The material contained herein is for information only and does not constitute investment advice or a recommendation to any reader of this material to buy or sell investments. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe to any investment. Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Stock market investments should be viewed as a medium to long term investment and should be held for at least five years. Any performance information shown refers to the past and should not be seen as an indication of future returns. Some of the ETFs invest predominantly in one geographic area; therefore any decline in the economy of this area may affect the prices and value of the underlying assets. To help improve our service and in the interests of security we may record and/or monitor your communication with us. HSBC Global Asset Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services of the HSBC Group. Approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the Financial Conduct Authority. Copyright © HSBC Global Asset Management (UK) Limited 2016. All rights reserved. HSBC Index Tracker Investment Funds is an Open Ended Investment Company that is authorised in the UK by the Financial Conduct Authority. The Authorised Corporate Director and Investment Manager is HSBC Global Asset Management (UK) Limited. All applications are made on the basis of the HSBC Index Tracker Investment Funds prospectus, Key Investor Information Document (KIID), Supplementary Information Document (SID) and most recent annual and semi annual report, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited, 8, Canada Square, Canary Wharf, London, E14 5HQ, UK, or the local distributors. Investors and potential investors should read and note the risk warnings in the prospectus and relevant KIID and additionally, in the case of retail clients, the information contained in the supporting SID. 16WS0009/0616/FP17-2078. Expiry 21/11/2017