HSBC poised to set out first house investment view

HSBC Global Asset Management has recently consolidated different investment businesses into one brand, and now it is about to set out for the first time a house view of investment strategy, says Philip Poole, London-based global head of macro and investment strategy.

Poole took this position about a year ago after working at the bank's sell-side research group. He was brought to the role by John Flint, the global head of asset management.

Flint has led a move by the group to discard separate brands for alternative investments (Halbis), structured and quant products (Sinopia), cash/liquidity business, private wealth management (Republic) and traditional funds management. All of these businesses are now branded simply as HSBC Global Asset Management.

However, analysts and fund managers at these different business units, and in different offices around the world, have continued to follow their own noses when it comes to global outlooks. Although this independence has its advantages, it can sometimes lead to conflicting messages to clients. And in an era when top-down events are dictating portfolio performance, the bank has felt the need to ensure a central set of macro beliefs is made more clear.

Poole has spent the past year consulting group investment professionals worldwide to come up with that view, which he intends to publish internally. He stresses that this is not meant to give fund managers marching orders. "We are not taking away fund managers' responsibility for performance," Poole says.

HSBC Global Asset Management has some 2,200 employees worldwide and manages around $465 billion of assets.

Instead the project is meant to provide them with what will become monthly updates and material they can pull together for presentations. He says this process has already helped people across teams consult one another more. It is part of the group's overall strategy to leverage its client list better to cross-sell products in a cohesive fashion.

So what is going to be HSBC's house view? That the US will continue to deleverage; that the euro will survive; that the 2008 financial crisis has fundamentally changed a world based on leverage; that poor demographics in developed countries and better demographics in emerging markets (with some key exceptions) will drive investment opportunities.

For asset allocation, Poole says investors should be overweight emerging-market currencies. He argues that spread products are going to be less attractive, given the way those spreads have compressed, but can present buying opportunities when they blow out, particularly for emerging-market bonds. Poole says China has managed its inflation problem and, if its cooling measures turn out to be too aggressive, has plenty of ways to re-stimulate the economy.

Developed markets are likely to suffer slow growth, periodic financial and political crises, and bank runs -- rather like emerging markets did in the 1980s and 1990s. The good news, however, is that the risk-off trade over the summer appears overdone, and expectations -- which were too sunny in the spring -- are now too gloomy.

Equity valuations on a price-to-book basis are attractive, although investors need to be able to stomach volatile swings and nasty shocks for several years before global stock markets are able to stage a durable rally. His biggest medium-term worry is the US municipal bond market, which he says is off most investors' radar screens, but could deliver a shock if it starts to see defaults.