HSBC Launches Further Capital Protection Hedge Fund Tranches

Investors Offshore, London

24 September 2002

HSBC Republic is to launch a further two tranches of its Capital Guaranteed fund of hedge funds.The move follows the success of the initial tranches of the Alternative Wealth Protector fund, launched last July.

Like the original tranches, the new tranches offer customers the combination of a 100 per cent capital guarantee at maturity, and the ability to gear up to a further 50 per cent. For each 15% incremental increase in the invested capital each year from launch, the product will lock in a profit of 5%. The maximum potential lock-in is 25% of the invested capital. The fund aims to invest in between 25 and 30 hedge funds. Target volatility is 8%.

With a minimum investment of US$10,000, the HSBC Republic Alternative Wealth Protector offers retail investors access to the hedge fund sector along with a capital guarantee at maturity. HSBC Republic - the private banking brand of HSBC - will monitor the product and act as investment adviser on the selection of hedge funds. The offer period for the new tranches will close on 25th October; they will have a five-and-a-half-year fixed term and will mature in May, 2008.

Paul Dunning, chief executive of HSBC Republic Investments, said: "Investment in absolute return funds and hedge funds has grown rapidly in recent years, fuelled by the realisation that hedge funds seek to deliver positive investment returns under all market conditions rather than performance relative to a benchmark."

The fund has a front-end charge of 3%. The management fee is 1.7% a year, plus 1.75%, covering the implementation and provision of the capital guarantees. The fund, which will be predominantly offshore, will be domiciled in the Cayman Islands.

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