Overview of the team running the fund and our investment process
We have one of the largest and most experienced teams in the industry that is solely focused on Securitised Credit (11 investment professionals, average experience of 21yrs, and over $10bn AUM).
Securitised Credit moves differently to traditional fixed income and has a complexity and illiquidity premiums. We combine a top-down, bottom-up investment approach along with in-depth fundamental credit research to exploit these premiums, while protecting principal investment value. Dynamically moving top-down allocation with a global reach is critical, as opportunities in Securitised Credit change regularly.
We aim to reallocate investments from one sector or region to another, enhance returns and exploit market inefficiencies to the best extent. Our global diversified portfolios generate consistently attractive risk-adjusted returns. We follow a disciplined investment process, backed by high quality, proprietary research and analysis allied with high conviction and risk management. We believe our philosophy will add value over our medium-term investment horizon.
We see an asymmetry of returns in this market, with good protection on the downside but significantly greater potential on the upside. Securitised Credit is a more complex investment universe compared to more traditional fixed income asset classes. We have successfully operated in this market for over 15yrs with positive returns.
Key opportunities and risks for the fund for 2026, and how we're positioned
Going into 2026, Securitised Credit remains attractive relative to many fixed income asset classes given the higher spreads on offer. Interest rates remain comparatively elevated to recent history and the emergence of inflation likely provides a floor on income. As spreads continue to tighten further over 2026, we expect capital appreciation offset any fall in rates. Credit performance continues to be good for Securitised Credit given the credit enhancement, with deals resilient despite concerns about borrowers' ability to pay.
We believe the dynamic allocation approach that has served us well to date will be once again a key factor in 2026, to provide stable returns and avoid areas of risk. Into 2026, the concentration to high quality sponsors will remain, but selectively we will allocate to lower tranches in these institutional quality deals where this is warranted. Credit risk analysis and management will be key in 2026.
In terms of positioning, CLOs remain attractive given the returns on offer and the substantial credit enhancement. For CMBS, we seek to avoid Secondary Retail, Secondary Hotel, Suburban office, and Operational Assets. In RMBS space, there are differences between regions: US Legacy Non-Agency RMBS is too low returning for the rating, UK RMBS is performing acceptably in a difficult economic environment and European RMBS is typically too expensive given the risk. Prime Credit Cards, Autos, Leases, Consumer Loans are no longer attractive due to risk concerns. Whole Business (pubs/operating assets) is directly impacted by the consumer cost of living stress.
A couple of current key investment opportunities in the portfolio
CLOs remain attractive given the returns on offer and the substantial credit enhancement. Low defaults (despite First Brands) and substantial credit enhancement means that we have preference to seek returns from CLOs. We prefer to hold high rated, more credit enhanced tranches as they will offer value given the market sell off. Our preference is to invest in broadly syndicated loan CLOs from top tier managers with extensive track records and avoid middle market loan CLOs, Private Credit CLOs and CRE CLOs.
For CMBS, the focus is on Single Asset Single Borrower CMBS (avoids accidental exposure to poor sectors and properties). CMBS remains property specific, but we remain hopeful that this sector is through the worst.
In RMBS space some non-agency sectors such as Single-Family Rental and CRT offer value with solid fundamentals and Australian RMBS has an attractive credit risk/return profile. As mentioned previously, opportunities in the ABS space are limited given the current risks, and therefore allocation to this area is done on an opportunistic basis.
Source: HSBC Asset Management as at 31/01/26.
For Professional Clients only. 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. Any forecast, projection or target when provided is indicative only and is not guaranteed in any way. This material does not constitute investment advice or a recommendation to any reader of this material to buy or sell investments. Any views expressed are subject to change at any time. Approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the Financial Conduct Authority. © Copyright HSBC Global Asset Management (UK) Limited 2026. All rights reserved.
