HSBC re-allocates resources to successful products
One of the key planks behind the new HSBC structure is the development of a strong multi-management unit.
“Irrespective of whether our products are manufactured in-house or outside, we need to screen them and combine them,” says Mr Dromer. “We will not sell funds to our clients if they have not been vetted by a centralised function.”
Having this unit at the gate of a product manufacturing factory works well both for clients and for internal quality control monitors, believes Mr Dromer.
“For those products which involve the delivery of alpha, you can from time to time fail, and from time to time succeed,” says Mr Dromer. “You can only promote these products when they are good. You have to screen them through your multi-manager unit in order to ensure the quality.”
HSBC has already pulled out of two areas of asset management which failed the test. “We have to identify what we are not good at,” reveals Mr Dromer. “US equities and Japanese equities were two areas in which we have probably not invested enough. Would they be a credible addition to the market place? We decided not, so gave up on them.”
Teams previously concentrating on generating alpha in US and Japanese equities have been disbanded, but this by no means signifies an abdication of responsibility, says Mr Dromer. Rather, it is a case of re-allocating resources to successful strategies. “We are concentrated on generating alpha in emerging markets,” says Mr Dromer. “We have a presence in those countries which no other manager can match.”
Among the emerging market products which HSBC is particularly promoting is the Indian equity fund, which had just $75m in assets in 2002, but is worth $3.5bn today.
Distributors such as Deutsche Bank, whose chief investment officer Klaus Martini has made a major call favouring Asian equities, have added this particular product to their lists of recommended funds.
While he is happy to personally go on the road and promote retail funds which he believes have a successful investment strategy, Mr Dromer is just as keen to review or prune those which do not make the grade. New European regulations concerning cross-border fund sales have provided a good opportunity to do this.
“We have not added funds that look like totally new innovations, which Ucits III allows for,” says Mr Dromer. “But we are completely revisiting our range. Ucits III is a good prompter for [this process], but we have always run this business with good discipline in terms of costs. We never get carried away by the fact that assets are growing fast, and we have more challenges ahead in terms of costs.”
