e-fundresearch.com: What is the current size of the fund?
Ercan Güner: In million Euro: 282,32 (per 31.1.2013)
e-fundresearch.com: Do you also manage other funds or mandates?
Ercan Güner: No, I personally manage only HSBC GIF Turkey Equity. However, as HSBC Global Asset Management Turkey we also manage domestic pension and mutual funds. There are also three equity fund managers who manage those funds and I am responsible for the equity strategy as Head of Equity Funds.
e-fundresearch.com: What is the total amount of assets you manage currently?
Ercan Güner: HSBC Global Asset Management Turkey’s AUM is EUR 1,4 Billion in all asset classes, equity strategy constitutes 25% of total AUM.
e-fundresearch.com: How long have you been in the business as a fund manager?
Ercan Güner: Prior to joining HSBC Global Asset Management Turkey team in April 2008, I served as the CFO of the Akdede Group of companies. I began my career in finance at Yapi Kredi Investment Banking arm in 1992, where I obtained a senior equity trader post and later moved to Yapi Kredi Asset Management as fund manager in 1999.
e-fundresearch.com: What are the main steps in your investment process and in which area is your competitive edge to add value to investors?
Ercan Güner: Investment strategy: The HSBC GIF Turkey Equity fund seeks long term returns from capital growth and income by investing in equity securities listed on ISE. Weight of equities in total assets cannot be lower than two thirds of its assets, however the fund is usually fully invested in stocks, except the management team expect a secular down-trend. The portfolio is diversified through a minimum of 20 to up to 40 stocks. For the purpose of efficient portfolio management the fund may also invest in index futures to gain market exposure. The fund invests in Turkish Lira denominated assets, and the currency risk is unhedged.
The objective is to maximize the return with a minimum deviation from the benchmark. Delivering consistently a minimum of market return (beta) plus a reasonable excess return (alpha) is the key to our investment philosophy. The same philosophy is applied to the portfolio construction process for optimum combination of alpha and beta components of the fund. Significant portion of the portfolio is invested in stocks selected with a bottom up approach and the remaining part is usually invested in a way of benchmark replication to keep the fund returns in tracking error targets.
The fund management team regularly screens a list of 100 investable stocks out of close to 400 listed stocks.
The key factors in the screening process are:
- Conformity to corporate governance principles
- Absence of manipulative/speculative actions
- Availability of research coverage
Then a second screen is applied in order to identify companies with:
- Reasonable valuations using multiple trailing and forward looking metrics
- Quality profitability profiles based on return on assets and profit margins
- Strong balance sheets, using leverage and coverage ratios
- Strong investment theme at a cheaper price
We also take into account consensus estimates, distribution of analyst recommendations in terms of buy, hold and sell recommendations.
Then, the final step consists of building a model portfolio. Consisting of just 10 stocks, the model portfolio normally constitutes 30% of the fund portfolio while the remainder (70% of the portfolio) replicates the MSCI Turkey Gross Index (for illustrative purpose only as the fund has no official benchmark). Depending on the market conditions and availablity of relatively cheap stocks, the active portion of the portfolio may be further increased to 40%.
The model portfolio is determined by a Stock Selection Committee composed of the CIO and Portfolio Managers, meeting every Friday. Investment themes, industry trends, earning results and revisions are discussed. A review of the model portfolio is processed and a new list of selected stocks is defined.
We believe, our competitive advantage over domestic asset management companies lies in the fact that domestic asset management companies are usually sentiment-driven and have a short-term perspective, which can lead them to miss long-term opportunities offered by the equity market. Being a fundamental investor, we are well-positioned to capitalise on the opportunities offered by the market inefficiencies. We believe that the majority of international asset management companies are not Turkey specialists. Although they may also employ a fundamental approach, we believe they are not able to monitor economic, political and company-specific developments closely or in an effective way because of their limited access to local knowledge. We are, however, Turkey specialists and the members of our dedicated investment team all have strong experience in the Turkish equity market. As a result, we believe our local knowledge provides us with a competitive advantage versus our international competitors. In addition, we also have access to the resources of the HSBC Global Asset Management Global Emerging Markets Equity team and its global and domestic networks. Our strong presence in the Turkey investment management industry also gives us access to the leading local and international research services of the brokerage houses. All of these factors enable us to utilize our stock selection skills in an efficient and effective way.
RISKS: Due to the concentration on only one geographic area the fund has a minor degree of diversification and consequently a higher level of risk. Investments in emerging markets may exhibit a more volatile performance and may be affected by reduced liquidity which make them risky. Investments in emerging markets may exhibit political, settlement, liquidity and custodian risks, as well as risks which may occur regarding accounting standards. Equity funds offer the chance to achieve a long term performance above average. However, the value of the fund shares may fluctuate relatively strong, which may lead to potential price losses. The fund is therefore more suitable for risk-sensitive, and long-term oriented investors. Due to the concentration on only a few markets/ securities the fund has a minor degree of diversification and consequently a higher level of risk.
e-fundresearch.com: Which benchmark is most relevant and how should investors compare the fund vs. benchmarks or peer groups?
Ercan Güner: The benchmark for the fund is MSCI Turkey Index that consists of 25 stocks. MSCI Turkey Index has been selected as benchmark since it well represents overall Turkish equity market.
This interview is answered by HSBC Global Asset Management Turkey and amended by HSBC Global Asset Management (Österreich). It is designed for sales and marketing purposes for the introduced fund and is not an offer or invitation to make an application to invest in this fund. All statutory requirements concerning impartiality of financial analysis are unaffected. A prohibition of trading concerning mentioned financial products before publishing this document does not exist. This document replaces neither a professional investment advice nor a relevant public prospectus or any actual semi-annual and annual reports. It is not an offer for subscription. This document is only directed to persons who have a permanent residence in Austria. It is not determined to addressees in any other jurisdictions or to citizens of the USA. This document is only intended for the recipient. The document or parts of it may not be disclosed to any third party or used for any other purpose without prior written consent. Past performance contained in this document is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. This fund may invest in financial derivative instruments. Derivative instruments can lead to a significantly more volatile price than the direct purchase of the underlying instruments. Due to the composition of the fund prices may fluctuate significantly in the short term to the downside as well as the upside. The fund is denominated in EUR currency. The fund invests in financial assets designated in a different currency than the base currency. An exchange risk results. If the investor’s domestic currency is not EUR, a further exchange risk may occur. This document is based on information obtained from sources we believe to be reliable but which have not been independently verified; therefore we accept no responsibility for accuracy and/or completeness. The opinions represented in this document express opinions of the author/the authors, editors and business partners of HSBC Global Asset Management (Österreich) GmbH and are subject to change. The shift of opinion has not to be published. The fund is not suitable for every investor. It can not be excluded that an investment in the fund could lead to losses for the investor. It is also possible that an investor might lose all of its initial investment. All information within this document do neither replace the official legal documents for the fund nor the simplified prospectuses respectively the Key Investor Information Documents and the most recent annual and semi-annual reports. Actual Prospectuses, Key Investor Information Documents and the latest annual and semi-annual reports can be obtained upon request and free of charge from Raiffeisen Bank International AG, Am Stadtpark 9, 1030 Wien. They are also available on the internet via www.assetmanagement.hsbc.com/at.