HSBC Republic Investments has introduced its first guaranteed fund of hedge funds with a minimum investment of $10,000.
The HSBC Republic alternative wealth protector fund invests in around 25 hedge funds through an underlying fund, HSBC Republic wealth protector. Unlike the underlying fund, the HSBC Republic alternative wealth protector fund guarantees at least the return of the original capital at the end of a five-year term. Investors will get 100 per cent of the growth in the underlying fund and there is also the chance to gear the investment up to 50 per cent.
The HSBC Republic alternative wealth protector fund also has a profit lock-in feature which works on an annual basis. This means that for every 15 per cent growth in the funds value each year, a 5 per cent profit on the invested capital will be locked in. The profit lock-in is capped at 25 per cent for the duration of the term.
The underlying funds portfolio of 25 hedge funds are selected by HSBC Republics investment team, which is spread across bases in London, New York and Geneva. They will cover a range of strategies, not only hedge funds with a long and short equity bias.
This funds low minimum investment is aimed at making funds of hedge funds accessible to a broader range of investors who find the $100,000 minimum of some funds prohibitive.
The capital guarantee and the diversification across 25 hedge funds make this a lower-risk product than traditional hedge funds. However, it is still likely to be of interest only to sophisticated high-net-worth clients and institutional investors who are looking for alternatives to conventional equity markets while they remain volatile.