HSBC Halves Tracker Fees, Yet ETF Outflows Persist

Its passive trackers are priced competitively yet its ETF arm has been beaten on price

Editor, Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

HSBC Global Asset Management has bolstered the competitiveness of its passive index tracking funds by slashing fees, yet its other passive instruments – exchange traded funds (ETFs) – continue to bleed assets.

HSBC announced today it has more than halved fees on index trackers on its U.S., European and FTSE All-Share funds, to 0.08 percent, 0.10 percent and 0.07 percent respectively. The new fees will be applied to new and existing customers from 15 November.

Andy Clarke, chief executive officer at HSBC Global Asset Management UK, said in a statement that the firm has always been at the forefront of passive fund development.

“Passive investing is a big and expanding market in the UK and as a fund provider we are committed to playing a part in this expansion,” he said.

The move brings the provider in line with the other major tracker providers like Legal & General, BlackRock and Vanguard.

ETF Arm Continues To Shed Assets

However, HSBC’s ETF range has been dogged by outflows year-to-date at €649 million, according to Deutsche Bank data as of 29 September. The vast majority of European ETF providers have had positive inflows so far this year.

Data from Bloomberg from 2 to 9 October show that only two HSBC ETFs had any flow activity: HSPX (S&P 500) and HRUD (Russia) saw outflows of almost $20 million and inflow of around $1 million respectively.

ETFs Not As Cheap As Trackers

Investors have piled out of HSBC’s two main funds which track global equities (ticker HMWD) and the FTSE 100 (ticker HUKX).

Adam Laird, passive investment manager at Hargreaves Lansdown, told “This is probably an outcome of the price war: HSBC’s range is low cost in some places but they’ve been undercut here.”

Both HMWD and HUKX charge 0.35 percent in annual fees.

A spokesman from HSBC responded that whilst the firm seeks to be competitive in pricing, “it's about overall value for our clients”.

“Pricing is an important but not the only measure. For instance, we do not embed derivatives in our ETFs so headline pricing should not be treated in isolation,” he said.

Bad Luck Could Turn Around

Laird added that HSBC’s advantage is its comprehensive range of single country funds, which range from Russia to Indonesia.

“Emerging markets have been massively out of favour this year. It’s probably unlucky, but they could benefit if this turns around,” added Laird.

HSBC has been managing index trackers since 1988, and ETFs since 2003. It now manages 28 ETFs with a total of €4.7 billion assets under management.

Rachael Revesz joined in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.