Global equity exposure with a little extra juice?

HSBC Multi Factor Worldwide Equity UCITS ETF (HWWA) is a long-standing active ETF that is managed using an investing process based on factor investing, which is described in this note. As discussed on pages 9 and 10, HWWA has been able to achieve modest outperformance compared to its global equity benchmark over the long term.

Global equities rose in 2025, with the rally appearing more broad-based than in previous years, despite volatility around the time of the “Liberation Day” tariff announcements in April. Over the year, HWWA outperformed the benchmark.

Although risks remain – American policymaking has been more volatile of late than it has previously – the mood in global equity markets still seems to be relatively buoyant at the time of writing. For investors seeking this exposure, with the possibility of some outperformance, HWWA could potentially be of interest. Further analysis is provided on the following pages.

Global equities exposure with quantitative overlay

HWWA aims to outperform the benchmark MSCI All Country World Index. The investment manager identifies stocks from this index and ranks them based on certain factors. Shares are then quantitively selected to create a portfolio to maximise exposure to the highest-ranking stocks.

Source: Bloomberg, Marten & Co

HWWA: factor investing for over a decade

Launched in 2014, with the current process instigated in 2017.

HWWA was launched by HSBC Global Asset Management in July 2014. Initially, the fund followed a more conventional global equity approach, but underwent a significant strategic shift around October 2017, when HSBC introduced its current multi-factor model. This change appeared to align the fund with a trend towards factor-enhanced investing, combining quantitative analysis.

Multi-factor investing

Multi-factor investing is an investment approach that seeks to enhance returns and manage risk by systematically targeting several well-established drivers of equity performance – known as factors – within a single strategy. Rather than relying on traditional market-cap weighting, multi-factor models assign portfolio weights based on characteristics linked to long-term excess returns, such as value, quality, momentum, low volatility and size. Each of these factors tends to perform differently across market cycles; by combining them, multi-factor strategies aim to smooth performance variability and reduce reliance on any single source of return.

The approach originated from decades of academic research in financial economics and has become increasingly popular among institutional investors seeking a balance between passive diversification and active risk management. Multi-factor portfolios use quantitative screening and optimisation techniques to select and weight stocks according to their exposure to these desired traits, while also seeking to control for unintended risks such as sector or regional concentration. In theory, the result should be a more robust and resilient equity portfolio that maintains broad market exposure but with tilts designed to capture persistent inefficiencies in markets.

Active ETFs, with their low costs and focus on liquid investments, should be well suited to multi-factor investing. Multi-factor strategies rely on systematic, rules-based models to identify and balance exposure to different factors, which makes them inherently quantitative and data-driven, with reference to an underlying index. Active ETFs such as HWWA are designed to provide a platform for using these models in real time, with managers able to adjust portfolio weights as factor signals evolve, without the constraint of a rigid fixed benchmark replication requirement.

HWWA: Quantitative overlay aiming for outperformance

HWWA ranks the stocks in the MSCI ACWI and then quantitively selects stocks to make up the portfolio.

HWWA’s investment manager identifies stocks from the MSCI All Country World Index (MSCI ACWI) and ranks them from the least to the most attractive, based on several of the above factors. The manager then quantitively selects shares to create a portfolio that seeks to maximise the fund’s exposure to the highest ranked stocks, while minimising its level of risk. This is done through the application of a series of constraints related to sector and company weights, so that the portfolio should not be overly concentrated in any particular area. The result should be a portfolio that has broad diversification while maintaining the desired factor exposures.

HWWA’s aim is for relative outperformance versus the index. That is, the direction of performance will correlate with global equities, but HWWA aims to do relatively better than the MSCI ACWI. Although the portfolio construction is systematic, the fund is actively managed through the selection and weighting of the factors within the model – decisions that reflect the manager’s research and judgement rather than following a fixed index rule set.

In common with most of the European active ETF sector, HWWA invests directly in its underlying securities rather than using derivatives, thus adopting a physical replication approach.

Structure

HSBC Multi Factor Worldwide Equity UCITS ETF has two share classes: distribution (ISIN: IE00BKZGB098) and accumulation (ISIN: IE0000378O66). Each is available on different exchanges and in different currencies, as per Figure 1:

Figure 1: HSBC Factor Worldwide Equity UCITS ETF, available exchanges and currencies

Source: HSBC Global Asset Management

Throughout this note we have used the ticker HWWA for consistency, and as the default investment for UK-based sterling investors. Performance comparisons and benchmark tracking are always calculated using NAV, ensuring consistency with the fund’s global investment universe.

Tracking error

The three-year tracking error of HWWA (to 31 January 2026) is 2.17%. Specifically, this represents the standard deviation of the difference between HWWA’s returns and those of the benchmark. This suggests HWWA provides more divergence than would usually be seen with a passive ETF, but with HWWA’s performance still hewing relatively close to that of the benchmark. This is relatively common for quantitative-based active ETFs, which investors often view as providing “benchmark plus” returns: that is, returns close to the benchmark over any set period, but with a small amount of outperformance hopefully generated by active management.

Fees

HWWA has a Total Expense Ratio (TER) of 0.25%, covering the management fee, custody and administration fees, registrar and audit/ compliance costs. The fee accrues daily within the fund’s NAV. It does not include the transaction costs of purchases and sales. Considering the active management element, HWWA’s TER is only a little higher than those of passive global equity ETFs, which typically have a TER of between 0.12% and 0.22%.

2025: another strong year for global equities

Markets rallied over 2025; the rally was global, rather than being dominated by the US.

2025 was a positive year in markets, as shown in Figure 2. Global equities, as measured by the MSCI ACWI, rose by over a fifth over twelve months. Markets appeared to be less “unipolar” than in much of the recent past. Although the technology-heavy US market – illustrated here by the S&P 500 – continued to perform strongly, it seemed to dominate investor attention to a lesser extent than in other recent years. For example, the UK saw an improvement in both sentiment and performance from depressed levels, and the seemingly unusual result – at least in recent years – of UK equities outperforming both their US and global peers. This is illustrated by the performance of the MSCI UK Index.

Figure 2: Market performance over 2025, indices rebased to 100

The chart shows a period of market weakness in April, when equities fell rapidly in the aftermath of President Trump’s “Liberation Day” tariff announcements. However, the downturn proved relatively short-lived, with an initial 90-day tariff pause followed by a series of negotiations and back-and-forth between the Trump administration and different countries.

As the tariff noise subsided over the rest of the year, investors appeared to focus their attention elsewhere and more towards corporate fundamentals. Company balance sheets and profitability remained broadly stable, supported by earlier cost control and solid cash positions, even as global trade slowed. Inflation continued to rise, but monetary authorities began signalling potential rate cuts to offset weakening growth momentum

Figure 3 shows the steady fall in interest rates across developed markets in the past two years. Such an environment can be positive for global equities, and this has the potential to pave the way for another good year for global equities, and by extension for HWWA if it continues to outperform.

Figure 3: US (Federal Reserve), eurozone (ECB) and UK (BoE) benchmark interest rates since January 2024

Source: Bloomberg, Marten & Co

Top 10 holdings

HWWA’s top 10 is closely aligned to the MSCI ACWI, but there are some important differences.

HWWA’s top 10 constituents list, as shown in Figure 4, closely matches the MSCI ACWI Index. Nonetheless there are some differences, showing the active management at work.

HWWA has a higher concentration to the largest components of the index, potentially hinting at the importance of momentum in factor investing and a pronounced exposure to the “Magnificent Seven” US technology names.

Figure 4: Top 10 holdings as at 31 December 2025

Source: HSBC Global Asset Management, Marten & Co

Asset allocation

HWWA’s asset allocation matches the benchmark relatively closely. Therefore, it is dominated by the United States geographically, and IT and financials in terms of sectors.

Figure 5: HWWA geographic allocation as at 31 December 2025

Source: HSBC Global Asset Management

Figure 6: HWWA geographic allocation relative to MSCI ACWI, %

Source: HSBC Global Asset Management; MSCI

Figure 7: HWWA sector allocation as at 31 December 2025

Source: HSBC Global Asset Management

Figure 8: HWWA sector allocation relative to MSCI ACWI, %

Source: HSBC Global Asset Management; MSCI

Peer group

Figure 9: Total return NAV performance & fees over periods for selection of large-cap global equity active ETFs ending 31 December 2025

Source: Morningstar, Bloomberg, Marten & Co

Figure 9 illustrates that HWWA ranks as one of the best performing active ETFs in the global large-cap equity sector in recent years. Given how new many active ETFs we have seen, the number of comparable funds declines the longer the time period.

While a comparison of fees for active ETFs may require some caution – different levels of “active” management may require different levels of fees – we observe that HWWA is the joint second cheapest of the funds in Figure 9.

Performance

As might be expected, HWWA’s performance has tended to track that of the MSCI ACWI Index quite closely. However, Figure 10 shows that HWWA’s managers have been able to add some value (after fees), with relative performance ahead of the benchmark over the majority of the five-year period.

Figure 10: HWWA’s NAV total return relative to MSCI ACWI index, rebased to 100, over five years to 31 December 2025

Source: Bloomberg, Marten & Co

Figure 11: Cumulative total return performance over periods ending 31 December 2025

Source: Bloomberg, Marten & Co.

Figure 11 illustrates that HWWA has outperformed the index over every time period from one month to five years.

Dividends

Dividends are passed through to shareholders, rather than being retained in the fund.

HWWA has both income and accumulation share classes, and the fund’s policy is to pass through cash dividends received from the underlying equity holdings to shareholders, through payouts or reinvestment, rather than to retain income within the fund. For the income class, dividends are typically paid on a quarterly basis.

The most recent dividend was 9.18p per share, paid in November 2025. This followed payments of 14.45p in August, 9.17p in May and 6.74p in February. The overall distribution for the year was therefore 39.54p, equating to a yield of 1.4% on the share price of £28.22 on 2 February. At any time HWWA’s yield may be higher or lower than the index.

Management

HWWA is managed by HSBC Investment Funds (Luxembourg) S.A., part of the HSBC Global Asset Management platform, which implements the fund’s multi-factor global equity strategy under the oversight of HSBC’s global investment framework.

HSBC Global Asset Management was founded in 1973 and has developed into a global investment manager with a presence across more than 20 countries and territories. As at 30 September 2025, it reported approximately US$852bn in assets under management and employed more than 660 investment professionals working across developed and emerging markets. The organisation manages assets on behalf of a client base that includes institutional investors, intermediaries and retail clients, through both segregated accounts and pooled funds.

The firm has investment teams conducting due diligence in regional markets. Research and expertise is shared across its international network. Leadership is part of HSBC’s broader governance framework, with the CEO of HSBC Asset Management reporting into HSBC’s global executive structure.

IMPORTANT INFORMATION