Investment Universe, Process, Strategy and Benchmark – How does the Fund Manager invest? (ISIN:LU0213961682)
Investment strategy:
The fund seeks long term returns from capital growth and income by investing in equity securities listed on ISE. Weight of equities in total assets can not 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 between 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 benchmark for the fund is MSCI Turkey Index that consists of 24 stocks. MSCI Turkey Index has been selected as benchmark since it well represents overall Turkish equity market. At least half of the stocks in our investment universe are selected among the most liquid 100 stocks. Trading liquidity, availability of research reports, corporate governance issues are taken into consideration in the construction of investment universe.
Performance Review 2005
Namik Aksel: "Due to the overweight positions on equity, fund performed well against its benchmark."
Performance Review 2006
Namik Aksel: "Due to the uncertainty in the market environment fund carried benchmark weights. In this year fund has a similar return contribution with respect to its benchmark."
Performance Review 2007
Namik Aksel: "The fund reduced risky asset exposure in reaction to increasing uncertainty in global economy but markets maintained to perform well. Early profit taking and risk aversion caused the fund to underperform."
Performance Review 2008
Namik Aksel: "After the announcement of benchmark change from mixed asset to pure equity, the fund has seen significant redemptions as a result of risk aversion stemming from global crisis. Liquidation of fund assets in illiquid market caused underperformance for the period. (2008 year begin to 10/07/2008)
In an environment of continuing redemptions and higher volatility the fund has only been able to deliver benchmark return. (10/07/2010 to year end)
The fund´s benchmark was composed of 70% ISE DIBS 365 Index (Government Bond Index) and 30% MSCI Turkey Index between 29.03.2005 and 10.07.2008; the benchmark Index has changed to 100% MSCI Turkey Index as of 10.07.2008."
Performance Review 2009
Namik Aksel: "The upturn in stock market spotted timely and stock selection was also successful."
Performance Review 2010
Ercan Güner (since March 2010): "From spring 2009 until mid-November 2010 Turkey significantly outperformed both developed markets and emerging peers. Solid banking system, robust growth led by strong domestic demand, historically low interest rates, successful fiscal performance and healthy debt dynamics and improving unemployment paved the way for this outperformance. By mid-November the Central Bank of Turkey (CBT) implemented a new policy mix, on contrary ongoing rate hikes in emerging countries, by decreasing policy rates and increasing reserve requirements simultaneously in order to curb current account deficit and discourage short term capital flows. This policy gave rise to concerns over TRY valuation and Turkish banks´ future earnings, and thus caused a sharp depreciation of TRY and sell-off in equity market led by banking sector stocks. Underperformance was more of a profit taking process and a shift to other emerging markets, given Turkey´s strong outperformance, tighter valuations and rising commodity prices. As for the fund’s performance, successful stock selection, timely implementation of sector rotation strategy and as much as possible overweight position in the banking sector all contributed positively to the performance."
Performance Review 2011
Ercan Güner: "During the first quarter, social unrest in the MENA region resulted in sharp increase in oil prices. Compared to other EMEA countries, Turkey has close economic ties with the region (20% of exports). Turkey’s high oil price sensitivity for its already problematic current account deficit led to a sharp sell-off with sizeable foreign fund outflows. In the second half of 2011, deterioration of capital flows due to EU debt crisis and recessionary fears in the world economy adversely affected the performance of the Turkish equity market as Turkey’s sizable current account deficit became one of the major concerns. CBT decided to end its easing bias towards the end of third quarter in order to limit the pass-through effect of depreciation in TL on inflation. Thus, MSCI Turkey underperformed other EM markets with a high volatility throughout 2011. The fund’s performance, net of fees and commissions, was almost equal to benchmark index in 2011. In the first half of 2011, the companies having significant exposure to MENA region adversely affected the performance of the fund. In the second half of the year, the fund switched to the defensive strategy and thus benefited from both lower equity allocation and higher weights in defensive stocks."
Performance 2012 - Year-to-Date
Ercan Güner: "Starting from 2012, sentiment in the world financial markets started to improve on the back of easing fears over EU debt crisis as EU is decisive to take necessary steps to contain the crisis. In perception of improvement in capital inflows, CBT gave signals to end its tightening bias, leading to strong buying interest in the Turkish banking stocks and rally in the Turkish equity market. The fund slightly underperformed its benchmark due to underweight equity allocation."
Performance since 2008
Ercan Güner: "The fund has continuously been outperforming its benchmark index since 2008 thanks to active management, successful stock selection and timely implementation of sector rotation strategy. Expertise in the local stock market, strong research team, accessibility to leading brokerage houses’ research services contribute positively to the fund’s performance. In particular, with the change in the economic conjuncture and the fund’s successful positioning according to cyclical upward trend in the economy, the fund started to outperform consistently its benchmark in April 2009."
Risks
x Due to the concentration on only one geographic area the fund has a minor degree of diversification and consequently a higher level of risk.
x 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.
x This sub-fund may invest in derivatives. Derivatives can lead to a higher volatility of the fund price compared to a direct investment in the corresponding underlying asset. The share price might therefore fluctuate substantially within short periods of time.
x 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.
x The fund is denominated in EUR. The fund also invests in securities denominated in other currencies which result in a currency risk. If the investor’s own currency is not EUR an additional currency risk may occur.
Disclaimer
This document is produced by HSBC Asset Management Turkey and amended by HSBC Global Asset Management (Österreich). This document 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 for internal use. 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 predominantly 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 Vienna. They are also available on the internet via www.assetmanagement.hsbc.com/at.
