What's up with HSBC

Something funny is going on at HSBC in terms of their alternative business and it's all happening behind the scenes.

It has been leaked out that HSBC is going to stop its Fund of Hedge Fund credit facility service. This was one of their key advantages in the Fund of Hedge Fund space. In fact this blogger knows of a number of clients who remained with HSBC only because of this facility. So are they going to show the door to some of their clients.

This follows other recent rumours. The most interesting one which has crossed the desk of this blog is that HSBC have made the decision to close a number of offices including Isle of Man, Jersey and Bermuda.... Just think about this one for a second. HSBC Alternatives which is effectively the ex Bank of Bermuda business is rumoured to be closing the Bermuda office.

All of this, of course follows HSBC's discovery that by appointing Madoff as a sub-custodian they could leave themselves open to litigation. This blog understands that this case has led to a complete review of sub-custody and 3rd party arrangements within HSBC ALternatives - perhaps not a surprise. Again, this blog is aware of a number of mandates that HSBC has indicated it is resigning from because of sub-custodians.

So here we have HSBC Alternatives - backing out of Fund of Funds, resigning from anything that involves sub-custody, currently being sued for mutiple billions in relation to Madoff and alledgedly closing three of its offshore centres including the old head office.

With this in mind, when I was having a chat over coffee with a senior HSBC person over the weekend, I wasn't as shocked as I might have been when they let it slip that HSBC are seriously considering getting out of alternatives. Or at least to only service those clients who are mainly regular mutual fund clients with alternative arms. Whether the decision is final yet I don't know.

But no announcement. I assume the rush to the door is a big worry. Taking Ireland alone, HSBC have the guts of 1,000 people here the vast majority of whom are in alternatives. But interestingly, quite apart from the recent move out of their old city offices, HSBC just finished emptying their European training centre in Sandyford - a facility they had pumped significant amounts of money into over the last 5 years and where up to recently a large number of staff were based.

Is HSBC preparing the path to close down their Alternatives business. What will the implications be in Dublin.

Interesting times....