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HSBC Bank International – Nasdaq Plus Growth Fund

Type: Ucits.

Aim: Growth linked to the Nasdaq 100 index.

Minimum investment: £5,000 or $5,000.

Place of registration: Dublin.

Investment split: 100 per cent linked to the Nasdaq 100 index.

Isa link: No.

Charges: None.

Commission: Initial 2.5 – 4.5 per cent.

Tel: 01534 606348.

Broker Panel:-
Chamberlein Eke, Senior partner, Anthony Chambers
Michael Posner, Principal, Charter Devon Law & Co
Andrew Hosking, Managing director, Eggar Forrester

Broker Ratings:-

Suitability to market: 7.0

Investment strategy: 6.7

Company&#39s reputation: 6.3

Charges: 5.3

Commission: 5.7

Product literature: 7.0

HSBC Bank International has introduced the Nasdaq plus growth
fund, a Ucits linked to the Nasdaq 100.
Looking at how the fund fits into the market Eke says: “A product like
this is always useful to have as an option for clients. It is particularly
useful in the current climate of market uncertainty.”
Posner says it is an offshore growth fund that is looking to provide a
level of capital protection and also to capitalise on the possible
growth in a very volatile index.

Hosking says: “This is a capital protected fund investing in the
highly volatile technology sector through an offshore vehicle.”
Turning to the type of client the product might be suitable for Posner
says: “UK and non-UK residents, with a median to aggressive
attitude to risk, and who are able to commit a capital sum for a period
of at least four years. The target group would appear to be those who
are disenchanted with interest bearing accounts and who are
prepared to gamble that the growth will exceed the returns they are
presently achieving. This is of interest to the financially aware client
who is prepared to take a step back into the technology sector, but is
reluctant to invest directly into technology funds because of their
volatility.”

Hosking feels it would suit clients looking for capital return
without risk and possibly non-UK taxpayers looking for a gross return.
Eke says: “It is suitable for investors with a cautious risk profile who
require some exposure to equities. Investors with more adventurous
risk profiles, but who want to hedge their bets because of the market
uncertainty will find this product useful.”

Moving on to the marketing opportunities Hosking says: “It is
suitable for some clients such as non-taxpayers and those wishing
to invest with nominal risk – which is probably just about everybody at
the moment.”
Posner feels it would suit non-residents who will benefit from gross
payment from a Jersey-based fund and could be part of a portfolio of
investments for capital growth.

Eke says: “As this is an offshore product, it should be marketed to
non-taxpayers and non-UK residents. For taxpayers onshore, tax
efficient options like Isas must be considered first before offshore
products. The tax implications of the product must be fully explained
to the investor.”
Considering the main useful features and strong points of the
product, each member of the panel picks up on the capital protection.
Posner adds: “The investment is of interest if one accepts the
premise that the Nasdaq is approaching its lowest point and will start
to re-establish itself towards positive territory over the ensuing four
years. Based on the leap of faith the acceptance of that premise
requires, the structure of the investment is well thought out.” Eke also
likes the fact that the fund is an offshore product.

Casting an eye over the product&#39s disadvantages Hosking says:
“It is a fixed-term contract over four years and growth may be limited
to just 10 per cent over four years, if index falls.”
Posner thinks that it is a highly complex investment that requires
considerable explanation and understanding. He feels the headline
rates are unlikely to be achieved in such a volatile index.

This is echoed by Eke who says: “Firstly, the volatility of the
Nasdaq is still a concern, particularly as some of the technology
stocks are still overvalued. Secondly, I am concerned about the
knowledge of potential investors regarding offshore investments.”

Looking at the flexibility offered by the product Posner says: “This
is not a flexible product. Clients must commit to the full term, or face a
potential loss of capital. There is nothing wrong with this, but it is a
point that must be stressed.”

Eke notes that there are two opportunities to encash the plan
every month if needed. He also mentions the reinvestment option on
maturity and says that for a product of this type it is fairly flexible.
Hosking says: “There is some flexibility in terms of early encashment
windows each month, but in reality investors should be looking at this
type of investment as a full-term contract.”

Moving on to HSBC Bank International&#39s reputation, Eke says:
“HSBC has a reasonable reputation as far as investments go,
particularly offshore. However, because most of its products are not
available through IFAs, it is difficult to form a concrete opinion of it.”
Hosking calls its reputation secure, global and reasonably innovative.
Posner says: “HSBC has a good reputation for bringing successful
niche products to the market and making them work.”

Turning to its past performance record Hosking says: “There are
no real star performers as far as fund history goes.”
Posner feels that a couple of its funds have done well, but the
majority are fairly mediocre.

Eke says: “Its past performance record as far as its funds are
concerned is not very good. In fact it is average and in some cases
below average.”

When asked which products will provide the main competition
Posner says: “As this is a limited offering in a specialist group, I do
not see that there is a notable amount of competition.”
Eke picks Scottish Life International, Scottish Mutual International,
Eurolife and NDF. Hosking says that any capital guaranteed bonds or
hedge funds will provide competition.

Turning to the charges for the product Hosking says: “Five per
cent of net asset value sounds reasonable for this type of
investment.”
Posner feels that the charges seem perfectly reasonable for this type
of fund while Eke says: “This level of charge is fairly standard,
although some providers have been known to offer lower initial
charges.”
Considering the commission, Posner and Hosking think it is quite
good, while Eke calls it about average.

Looking at the product literature Posner says: “The product
literature is good and comprehensive. The product itself is a complex
one and this has obviously to be reflected in the documentation.”
Eke notes the fact that all the documents are contained within one
folder. He says the literature is clear and easy to read with the
exception of the mini prospectus, which he feels is far too complex for
the average investor. Hosking calls the literature: “Very good, simple
and clear.”

Summing up, Eke says: “There is a situation whereby the investor
may not recover the original investment. This possibility should be
made clearer and this means the capital is not totally secure.
Secondly, the brochure does not fully explain the tax implications of
the product.”
Hosking says: “A useful product in today&#39s volatile climate. Although it
seems a bit perverse linking the word guarantee to Nasdaq, it might
just work.”

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