Exchange Traded Funds (ETFs)

Our Solutions

For Professional Clients only

The value of an investment in the portfolios and any income from them can go down as well as up and as with any
investment you may not receive back the amount originally invested.
 Our overall AUM (end of June 2018)

USD6.7bn
Our ETFs
Our range of 27 ETFs enables our clients to access developed and emerging
equity markets at global, regional and country levels. We are recognised as
experts in emerging markets, underpinned by our footprint, our local market
knowledge and access through out global network. This has allowed us to Cost
develop a successful broad emerging market ETF range to sit along side our Transparent
efficient
developed market products. This combined offering allows investors to access
global equity markets and manage global investment portfolios.

HSBC active systematic ETFs

In October 2017, we launched our first active systematic strategies. These ETFs will take
advantage of our long track record in smart beta and fundamentally weighted strategies, a Tracking
well resourced research team of 20 investment professionals, supported by technology
infrastructure and experienced ETF portfolio managers. Both ETFs offer diversification from
passive and active strategies, and cost efficient access to ‘smart beta’ solutions.

HSBC Multi Factor Worldwide Equity UCITS ETF: The strategy uses a proprietary multi
factor investment model which aims to provide consistent outperformance against a market
capitalisation weighted index over the medium to long term through exposures to a suite of
diversified factor-based risk premia.

HSBC Economic Scale Worldwide Equity UCITS ETF: The strategy uses a systematic
investment approach and invests in companies according to their ‘economic scale’. The
chosen measure for economic scale is a company’s contribution to Gross National Product,
often referred to as ‘value added’.

Cost efficiency in practice

At the heart of our investment process is delivering close tracking error and managing tracking error budgets, while minimising the funds
execution costs. We have a proven track record in providing competitively priced market access solutions; supported by our dedicated
portfolio management teams, our investment in the latest trading technology and a dedicated global equity dealing team.

TER / OCF (%) Market average1

Euro Stoxx 50
HSBC Euro Stoxx 50 UCITS ETF 0.05 0.11
MSCI Japan
HSBC MSCI Japan UCITS ETF 0.19 0.33
S&P 500
HSBC S&P 500 UCITS ETF 0.09 0.12
MSCI World
HSBC MSCI World UCITS ETF 0.15 0.28
MSCI Emerging Markets
HSBC MSCI Emerging Markets UCITS ETF 0.40 0.39

Source: Bloomberg, HSBC Global Asset Management as at end of June 2018.

1. Market average has been computed by looking at the TER of the main Europe-domiciled ETFs tracking the same benchmark.

Exchange Traded Funds: Our Solutions 2

ETF/ETP assets by region listed
3,423
2,130 2,405

802
562
USDbn

506

276
158 170
136 126
117 117
86
65

50
2015 2016 2017
Canada USA Europe Japan Asia ex Japan

Benefits of HSBC ETFs

Diversification
Benefits of broad exposure
within an asset class or
category.
Transparency
The basket of underlying
securities (“PCF”) is
published every day.
USD650bn
YTD December 2017-
net inflows globally

Cost effective Liquidity

Relatively low costs and ETF liquidity comes from the
transparent annual
management fees.
underlying securities and is
enhanced by secondary ETF AUM growth 2017
markets.

36.3%
Accurate No minimum
Precision tracking Controlled risk investment
Target exposure to asset Robust quantitative portfolio Physical replication ETFs can be bought and
classes, investment style or management, trading and minimizes risk. sold in 1 share.
sector. risk monitoring ensure
efficiency.

Source: ETFGI as at end of December 2017.

Exchange Traded Funds: Our Solutions 3

Partnership in index and systematic equity
We have successfully managed index funds for external clients since

30+ years
1988, with dedicated portfolio management teams across global
markets, leveraging our infrastructure and expertise. We currently
manage USD43 billion1 in passive and systematic strategies. Our
ETF solutions are built on our strong index tracking heritage,
integrated platform and disciplined process.

We take a pragmatic approach to managing ETFs with two equally

experience managing
important objectives: close tracking and minimising costs.
passive and systematic
We offer equity market exposure to a range of global markets. We
carefully select indices where we can manage trading costs and
liquidity.
equity portfolios
Our tracking method and value-added approach to managing passive
funds have enabled us to consistently produce returns that closely
mirror the index within target tracking tolerances. The strength of HSBC’s capabilities
Through considered implementation, we aim to find the optimal
trade-off between temporary tracking error and transaction costs,
when trading at large rebalance points, such as an index
reconstitution or a portfolio model review. The optimal balance and
duration of implementation is important in achieving this objective
and ultimately improves portfolio performance over time. Our
research has shown this approach adds, net of transaction costs, to
the performance of passive portfolios and is driven as a function of
the size of the opportunity set available, i.e. frequency of rebalances
and number of index changes. The diversification of implementation ESG and
is based on the detailed analysis of trade characteristics such as munitions
liquidity, demand and supply profiles, volume multiple indicators,
price movements over short periods, expected market impact, and
stock
portfolio risk. screening
Strong
HSBC added value relationship
with the
administrator
01
07
Execution Pre-trade
analysis Competitive
execution
Evolve
strategy
02 costs
06 Added Trading
strategy Dedicated
Value global equity
dealing team
Continuous
review 03
Investment
05 team
Execution review
04

1. As at end of June 2018.

Source: HSBC Global Asset Management. For illustrative purposes only.

Exchange Traded Funds: Our Solutions 4

 Strong index tracking heritage
INDEX & ACTIVE

30

Strategy, portfolio construction and

Launch of proprietary
SYSTEMATIC quantitative tools.
Strategies

Core research team

2011

Establishment of

2000
Years experience in index and quantitative equity management

research
Systematic Research
Launched our first UK index team within HSBC Global

1988 – 1998
fund – American Index Fund. Asset Management.
1989 – FTSE All Share Index Developing our active
Fund, HSBC European Index systematic model
Fund, and, HSBC Japan Index portfolios and building
Fund research and insights
leveraged by our equity
1994 – HSBC FTSE 100 Index portfolio managers
Fund
1997/1998 – HSBC FTSE 250
Index Fund, and HSBC Pacific
Index Fund

Portfolio modeling /
Development of our
industry leading Visuliser

construction
2012
platform, a proprietary
portfolio modelling,

2004
construction and risk
1st Multi Factor Institutional
analytics system –
mandate
integrated across our
global network

Developing proprietary technology

Launch of HSBC’s

Portfolio / stock
Global Equities (MSCI ACWI
2006

proprietary portfolio and

management
2015
based) strategy launched stock investment decision
tool – TRAC – supporting
UK Mutual funds launched – US,
our passive investment
UK and Japan country funds
process to deliver
improved and scalable
execution
2009 – 2011

Physical 2009 - Listed our first ETFs on

Replication the LSE.
Launched 24 ETFs across

Cash management
developed and emerging Roll out and further
2016

markets. integration of PECMan,

Dedicated 2010 – cross listed our ETFs
across France, Germany and
the proprietary Cash
Management Investment
passive portfolio Switzerland Decision Tool -
supporting our passive
management team investment process

across all types of

2012

Launch of our Fundamentally

index solutions Weighted Strategies: Economic
Scale Equity
Risk modelling

Updates to our risk

2015

modelling – creation of
proprietary tools and
High tracking Launch of UCITS Common
resources
2015

Contractual Funds, based on

accuracy our Economic Scale Equity
Strategies – offering tax
Large efficient, transparent cross
Enhancements to our process

border pooling
investments Use of trade optimisation
in the latest techniques that improve
implementation
2015+

Launch Multi Factor strategies- risk / adjusted returns

Trading /

trading Income, HGIF Global Lower focusing on the equity

2017

Carbon Equity market trading micro

technology Launched two new Active ETFs
structure, with access to
data and technology to
– following our proprietary enhance the process and
Active Systematic strategies fund risk adjusted returns
2018

Index projections

Launch of our new ICAV

2016+

platform in Ireland to promote

our passive funds cross border. Proprietary projection of
index changes by the
HSBC Index Funds Team

Exchange Traded Funds: Our Solutions 5

Our ETF investment process

Index activity / Rebalances

 Rebalance / review
 Timing and announcement
 Frequency and overlap

Client requirements
 Objectives
 Constraints
 Universe
Strategy
 Market
segment  Analysis
 Impact
 Estimated cost / risk

Portfolio construction approach

 Size of assets
 Breadth of benchmark
 Liquidity profile of stocks
 Custody and admin costs
Trade execution
 Index rebalance frequency Benchmark / Market
 Market access route
events monitoring
 Method of execution
 Corporate actions
– electronic
 Strategy weights
 Reporting
 Free float and share
 Risk trading
in issue changes
 Dividend
management
 Share offerings
 Rights issues

Risk management

Source: HSBC Global Asset Management. For illustrative purposes only.

Exchange Traded Funds: Our Solutions 6

Investing in proprietary technology
At HSBC Global Asset Management we have heavily invested in
leading investment technology to support our investment process
and seize opportunities for our clients as they emerge. Our leading
proprietary technology ensures the efficiency and accuracy of
information- supporting consistent tracking and fund performance. At Trade
modelling
HSBC our technological developments are integrated into our Exposure
Management
investment platform, providing: module

 In-house proprietary algorithms and optimisation techniques, Algorithmic Fund /

trades Benchmark
 Direct feeds of large pools of data, Passive module
investment
 Risk management coded and embedded across the platform at Risk process
Management
both pre- and post-trade. and reporting

This is ever evident in the regards to managing our ETF range;

Access, roles
where the technology compliments the ability of our investment team and privileges
Order
to bring cost savings and better performance outcomes for funds and Management
clients. integration

Physical replication and optimisation

Our ETFs benefit from our physical replication approach- where our portfolios are
invested in the constituents of the underlying index, and do not use synthetic
instruments, such as swaps sand other derivatives, to mirror index performance.

Some studies have shown that synthetic funds can offer a lower tracking error over
time than physically replicated funds. However, the risks associated with synthetic
index-based funds, most importantly counterparty risk, are often regarded as a less
attractive investment option.

In cases where buying all the underlying securities is not cost-effective, physical
funds can use an optimised method of portfolio construction and trade generation.
The optimisation method, purchases a representative proportion of securities in the
underlying index, which is highly correlated to owning the entire index. Optimisation
offers lower costs especially in regards to broad indices composing a very large
number of stocks such as the MSCI Emerging Markets.

Controversial weapons screening: benefit

Closely Tracked, of doing the right thing
In 2010 HSBC Global Asset Management implemented a screening
Minimised Execution of controversial weapons such as anti-personnel mines, cluster
munitions, biological and chemical weapons, and depleted uranium
Costs across the active business to exclude investments in issuers that are
involved in these weapons.

We subsequently expanded this screening to optimised index funds,

and then later to our entire passive ranges including our suite of
ETFs.

The Convention on Cluster Munitions (CCM) took effect in August

2010. Several countries adopted legislation on cluster munition, but
the laws around passive funds investing are not clear cut.

We believe there are several reasons why the decision to expand the
screening across all our equity investments is the right one:

 We aim to comply with the spirit and the letter of the law

 The screening currently has a minor performance/tracking

impact. We believe that as the focus on this subject increases,
companies still involved might choose to cease their
involvement, reducing the need for screening

Exchange Traded Funds: Our Solutions 7

How to invest in HSBC ETFs
HSBC ETFs can be bought through a regulated stock exchange.
They are easy to use, a low cost investment option and are widely
available on most online brokerage accounts and through financial
advisers.
Authorised participants1
HSBC ETFs are supported by a large network of authorised
participants. The following list of institutions are authorised to create
and redeem shares in the ETF range:

Goldenberg HSBC Global

Stockbroker Hehmeyer Markets

You can buy HSBC ETFs during daily trading hours using a
stockbroker. If you do not have a stockbroker already then the IMC Trading Optiver

exchange can help you locate a stockbroker. Please note that other
fees may apply.
Susquehanna BAML
HSBC ETFs are listed throughout Europe:

 London Stock Exchange Flow Traders Virtu

 Deutsche Boerse
Morgan
 Euronext Paris Jane Street
Stanley
 Six Switzerland
Societe
Commerzbank
 Borsa Italiana Generale

RBC
Execution platforms Official Market Makers

HSBC ETFs can be purchased via a wide range of execution Authorised Participants
platforms some of which are listed below:

Aegon Elevate Raymond James

AJ Bell Fidelity Funds Network Standard Life
Alliance Trust Savings James Hay Transact
Ascentric Novia Zurich
Aviva Wrap Nucleus

Why HSBC as an ideal ETF partner?

Focused product Robust investment Track record and Competitive Transparent Liquidity and
offering process performance pricing accessibility

Core index 1. In depth analysis A strong history of The ability to offer 1. Fully transparent 1. Quoted
capabilities covering of portfolio low tracking error competitive with physical continuously
a large variety of universe drawn from our TER/OCF across replication, no throughout the
markets 2. Robust deep experience in our ETFs securities day on European
technology and index based lending exchanges
support investing 2. All constituents 2. Market making
infrastructure online commitments for
3. Rigorous risk all products
monitoring

1. The contact details of our authorised participants are available on our dedicated ETF website- http://www.etf.hsbc.com/etf/uk/professional/trading.html
Source: HSBC Global Asset Management. For illustrative purposes only.

Exchange Traded Funds: Our Solutions 9

HSBC ETF range

Base Dividend Replication

Fund name ISIN currency TER / OCF AUM (USD) frequency method

Developed markets – regional exposure

IE00B4X9L533
HSBC MSCI WORLD UCITS ETF USD 0.15% 566,734,644 Quarterly Optimisation
DE000A1C9KL8

IE00B5BD5K76 Physical
HSBC MSCI EUROPE UCITS ETF EUR 0.20% 185,260,924 Semi-annual
DE000A1C22L5 replication

IE00B4K6B022 Physical
HSBC EURO STOXX 50 UCITS ETF EUR 0.05% 147,449,230 Semi-annual
DE000A1C0BB7 replication

HSBC MSCI PACIFIC ex JAPAN IE00B5SG8Z57 Physical

USD 0.40% 36,157,024 Semi-annual
UCITS ETF DE000A1C22P6 replication

Developed markets – single country exposure

IE00B5KQNG97 Physical
HSBC S&P 500 UCITS ETF USD 0.09% 3,049,015,329 Semi-annual
DE000A1C22M3 replication

IE00B5WFQ436 Physical
HSBC MSCI USA UCITS ETF USD 0.30% 75,698,658 Semi-annual
DE000A1C22K7 replication

IE00B42TW061 Physical
HSBC FTSE 100 UCITS ETF GBP 0.07% 214,436,415 Semi-annual
DE000A1C0BC5 replication

Physical
HSBC FTSE 250 UCITS ETF IE00B64PTF05 GBP 0.35% 55,027,702 Quarterly
replication

IE00B5VX7566 Physical
HSBC MSCI JAPAN UCITS ETF USD 0.19% 234,854,804 Semi-annual
DE000A1C0BD3 replication

IE00B51B7Z02 Physical
HSBC MSCI CANADA UCITS ETF USD 0.35% 33,791,524 Semi-annual
DE000A1JF7N6 replication

Developed markets – property exposure

HSBC FTSE EPRA/NAREIT IE00B5L01S80 Physical

USD 0.40% 146,739,585 Quarterly
DEVELOPED UCITS ETF DE000A1JXC78 replication

Global markets – broad exposure

HSBC ECONOMIC SCALE IE00BKZG9Y92

USD 0.25% 420,249,255 Quarterly N/A (active)
WORLDWIDE EQUITY UCITS ETF DE000A2JG4F7

HSBC MULTI FACTOR IE00BKZGB098

USD 0.25% 249,201,811 Quarterly N/A (active)
WORLDWIDE EQUITY UCITS ETF DE000A2JG4G5

Source: HSBC Global Asset Management, as at end of June 2018.

Exchange Traded Funds: Our Solutions 10

HSBC ETF range

Base Dividend Replication

Fund name ISIN currency TER / OCF AUM (USD) frequency method

Emerging markets – regional exposure

HSBC MSCI AC FAR EAST EX IE00BBQ2W338

USD 0.60% 287,798,451 - Optimisation
JAPAN UCITS ETF DE000A1W2EK4

HSBC MSCI EM FAR EAST UCITS IE00B5LP3W10

USD 0.60% 37,086,531 Semi-annual Optimisation
ETF DE000A1C22Q4

HSBC MSCI EM LATIN AMERICA IE00B4TS3815 Physical

USD 0.60% 14,890,688 Quarterly
UCITS ETF DE000A1JF7T3 replication

HSBC MSCI EMERGING MARKETS IE00B5SSQT16

USD 0.40% 264,465,424 Quarterly Optimisation
UCITS ETF DE000A1JXC94

Emerging markets – single country exposure

IE00B5W34K94 Physical
HSBC MSCI BRAZIL UCITS ETF USD 0.60% 28,140,562 Semi-annual
DE000A1C22N1 replication

IE00B3S1J086 Physical
HSBC MSCI TAIWAN UCITS ETF USD 0.60% 11,143,087 Semi-annual
DE000A1JF7R7 replication

HSBC MSCI INDONESIA UCITS IE00B46G8275 Physical

USD 0.60% 45,228,777 Semi-annual
ETF DE000A1JF7Q9 replication

IE00B3Z0X395 Physical
HSBC MSCI KOREA UCITS ETF USD 0.60% 10,629,552 Semi-annual
DE000A1JXC60 replication

IE00B3X3R831 Physical
HSBC MSCI MALAYSIA UCITS ETF USD 0.60% 4,809,838 Semi-annual
DE000A1JF7S5 replication

IE00B44T3H88 Physical
HSBC MSCI CHINA UCITS ETF1 USD 0.60% 367,692,189 Semi-annual
DE000A1JF7L0 replication

HSBC MSCI CHINA A INCLUSION Physical

IE00BF4NQ904 USD 0.60% ~10,000,000 Quarterly
UCITS ETF2 replication

HSBC MSCI MEXICO CAPPED IE00B3QMYK80 Physical

USD 0.60% 10,796,171 Semi-annual
UCITS ETF DE000A1JF7P1 replication

HSBC MSCI SOUTH AFRICA IE00B57S5Q22 Physical

USD 0.60% 3,800,469 Semi-annual
CAPPED UCITS ETF2 DE000A1JF7M8 replication

IE00B5BRQB73 Physical
HSBC MSCI TURKEY UCITS ETF USD 0.60% 5,563,625 Semi-annual
DE000A1H49V6 replication

HSBC MSCI RUSSIA CAPPED IE00B5LJZQ16 Physical

USD 0.60% 179,010,993 Semi-annual
UCITS ETF DE000A1JXC86 replication

1. As at 27th July 2018 (launch date).

2. As at 24th April – previously HSBC MSCI South Africa UCITS ETF.
Source: HSBC Global Asset Management, as at end of June 2018.

Exchange Traded Funds: Our Solutions 11

Contact
For more information, please contact us:
Telephone: 0800 358 3011
Email: wholesale.clientservices@hsbc.com
Website: http://www.assetmanagement.hsbc.co.uk/en/intermediary

Key risks
The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you
may not receive back the amount originally invested.
 Exchange Rate risk: Investing in assets denominated in a currency other than that of the investor’s own currency perspective exposes
the value of the investment to exchange rate fluctuations.
 Derivative risk: The value of derivative contracts is dependent upon the performance of an underlying asset. A small movement in the
value of the underlying can cause a large movement in the value of the derivative. Unlike exchange traded derivatives, over-the-counter
(OTC) derivatives have credit risk associated with the counterparty or institution facilitating the trade.
 Index Tracking risk: The performance of the Fund may not match the performance of the index it tracks because of fees and expenses,
market opening times and regulatory constraints.
 Operational risk: The main risks are related to systems and process failures. Investment processes are overseen by independent risk
functions which are subject to independent audit and supervised by regulators.
 Liquidity risk: Liquidity is a measure of how easily an investment can be converted to cash without a loss of capital and/or income in the
process. The value of assets may be significantly impacted by liquidity risk during adverse market conditions.
 Emerging Market risk: Emerging economies typically exhibit higher levels of investment risk. Markets are not always well regulated or
efficient and investments can be affected by reduced liquidity.
 Focused Strategy risk: Funds with a narrow or concentrated investment strategy may experience higher risk and return volatility and
lower liquidity than funds with amore diversified approach.

Important information
For Professional Clients only and should not be distributed to or relied upon by Retail Clients.
The material contained herein is for information only and does not constitute legal, tax or investment advice or a recommendation to any
reader of this material to buy or sell investments. You must not, therefore, rely on the content of this document when making any investment
decisions.
This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use
would be contrary to law or regulation. This document is not and should not be construed as an offer to sell or the solicitation of an offer to
purchase or subscribe to any investment.
Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target
where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any
failure to meet such forecast, projection or target.
HSBC ETFs are sub-funds of HSBC ETFs plc (“the Company”), an investment company with variable capital and segregated liability between
sub-funds, incorporated in Ireland as a public limited company, and is authorised by the Central Bank of Ireland. The company is constituted
as an umbrella fund, with segregated liability between sub-funds. Shares purchased on the secondary market cannot usually be sold directly
back to the Company. Investors must buy and sell shares on the secondary market with the assistance of an intermediary (e.g. a stockbroker)
and may incur fees for doing so. In addition, investors may pay more than the current Net Asset Value per share when buying shares and may
receive less than the current Net Asset Value per Share when selling them. UK based investors in HSBC ETFs plc are advised that they may
not be afforded some of the protections conveyed by the Financial Services and Markets Act (2000), (“the Act”). The Company is recognised
in the United Kingdom by the Financial Conduct Authority under section 264 of the Act. The shares in HSBC ETFs plc have not been and will
not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United
States Persons. Affiliated companies of HSBC Global Asset Management (UK) Limited may make markets in HSBC ETFs plc. All applications
are made on the basis of the current HSBC ETFs plc Prospectus, relevant Key Investor Information Document (“KIID”), Supplementary
Information Document (SID) and Fund supplement, and most recent annual and semi-annual reports, which can be obtained upon request
free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ. UK, or from a
stockbroker or financial adviser. Investors and potential investors should read and note the risk warnings in the prospectus, relevant KIID and
Fund supplement (where available) and additionally, in the case of retail clients, the information contained in the supporting SID.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally
invested. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate.
Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets.
Stock market investments should be viewed as a medium to long term investment and should be held for at least five years. Any performance
information shown refers to the past and should not be seen as an indication of future returns.
To help improve our service and in the interests of security we may record and/or monitor your communication with us. HSBC Global Asset
Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services
of the HSBC Group. Approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the
Financial Conduct Authority.
www.assetmanagement.hsbc.com/uk Copyright © HSBC Global Asset Management (UK) Limited 2018 All rights reserved.
18-XB-0619 EXP: 30/11/2018

Exchange Traded Funds: Our Solutions 12