HSBC Global Developed Index Fund 3: Safe, Cheap - But Underpowered

Index funds are supposed to be the no-nonsense answer to investing: track the market, keep costs low, and let compounding do the work.

The HSBC Global Developed Index Fund 3, launched in November 2022, is pitched exactly that way. But its short track record suggests it may not be giving investors the full power of the global equity engine.

The Numbers

Since launch in late 2022, the fund has returned +12.25%, compared to +12.52% for its benchmark. That’s a near-perfect mirror of the index, minus 0.27% – exactly what you’d expect from fees and tracking difference.

Annualised, that comes to ~6.5% per year for HSBC versus ~6.6% per year for the benchmark.

On £100,000 invested, you’d now have £112,250 in HSBC versus £112,520 in the benchmark.

The Problem With “Almost the Market”

6.5% per year may sound fine, but here’s the rub: global equities, measured by MSCI World, have compounded closer to 13% p.a. over the last five years.

If the HSBC fund continues at its current pace, £100k grows to just £352k in 20 years. The same money in global equities at 13% p.a.? £1.15 million.

That’s an £800,000 gap. Not because of a market crash, but because of underpowered compounding.

Why the Underperformance?

1. Launch timing: Since inception in late 2022, markets have had a choppy run, so the fund’s history captures more turbulence than boom.
   

2. Fee drag: Even a modest 0.2–0.3% fee chips away at returns. Over decades, that becomes six-figure money.
   

3. Tracking methodology: The fund follows a developed markets benchmark, but may lag slightly when compared with more aggressive global equity indices.

The Verdict

The HSBC Global Developed Index Fund 3 does exactly what it says on the tin: it tracks its benchmark, minus costs. But the problem isn’t whether it’s efficient - it is. The problem is that, so far, its returns are a shadow of what global equities have delivered.

For long-term investors, the question isn’t whether you want “almost the market.” It’s whether you can afford to miss out on hundreds of thousands of pounds of compounding power.

Because in pensions and ISAs, the risk isn’t volatility. The real risk is settling for less. Disclaimer: This content is opinion based on the disclosed facts and sources above, including fund factsheets, benchmark data, and publicly available filings as at time of publication. An honest person could hold this opinion on those facts (Defamation Act 2013, s.3). I publish this in the public interest to inform UK savers about costs, risk, and performance of widely‑marketed products (s.4). This article is for educational and informational purposes only and does not constitute financial advice, investment advice, or a recommendation to buy or sell any financial product. Past performance is not a reliable indicator of future results.

All investments carry risk, including the potential loss of capital. References to performance figures are based on historical data and illustrative examples only. You should conduct your own research or seek advice from a qualified financial adviser before making investment decisions. Alpesh Patel OBE www.campaignforamillion.com