Industry Updates

HSBC AM switches global small cap ETF from full to optimised replication on low demand

HWSC houses $87m assets under management

Jamie Gordon

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HSBC Asset Management will change from a full to optimised replication methodology on its global small cap ESG ETF following “relatively small” asset gathering.

Effective 31 August, the $87m HSBC MSCI World Small Cap ESG UCITS ETF (HWSC) will no longer capture the full 1,410 constituents of its underlying MSCI World Small Cap SRI ESG Leaders Select index.

HWSC will instead capture a subset of these securities to try and match the performance of the benchmark as closely as possible.

HSBC AM noted not holding every stock – or holding stocks at different weights to the parent index – “may result in slightly higher” tracking error but will have the benefit of lower transaction costs.

In a shareholder notice, the firm said: “The directors, in conjunction with the investment manager, regularly review the strategy and performance of the fund to ensure that they are fit for purpose and benefit shareholders from a cost perspective.

“Due to the level of AUM of the fund being relatively small, it is in the best interests of the fund to switch from a fully replicating strategy to an optimisation strategy, due to the cost inefficiencies associated with using a fully replicating strategy.”

The news comes after the ETF issuer shut the HSBC Bloomberg EUR Sustainable Corporate Bond UCITS ETF (HEUC) in May, with the product’s $14.5m AUM far beneath the $50m threshold for economic viability.

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