Portfolio Update

    RNS Number : 6495B
  HSBC European Absolute Limited
  19 August 2008
   

    HSBC European Absolute Limited
    31 March 2008 - 31 July 2008 Review

    Objective
    HSBC European Absolute Limited (the "company") aims to achieve equity like returns with fixed income levels of volatility from selective
investment, principally in a diversified pan-European portfolio of hedge funds.  The portfolio will consist of holdings in funds with
absolute return objectives managed by a number of different investment advisers in the UK and Europe. The predominant investment process
used by these managers, to achieve an absolute return objective, is likely to be in equity long/short strategies. These hedge funds are
selected and monitored by HSBC Alternative Investments Limited ("HAIL"), who blend the holdings to provide a diversified portfolio.

    The company was launched on 20 April 2001. 

                           Summary of Fund
                                        Euro             Sterling
 Net Asset Value (NAV) per share     EUR 2.1726         GBP 1.5518
     No. of shares in issue        EUR 15,851,811     GBP 13,754,059
            Bloomberg                  HENE LN           HENS LN
             Reuters              HSBC/HMGG; HENx.L  HSBC/HMGG; HEN.L
              ISIN                  GB00B0BHJV34       GB00B0BHKX21
              Sedol                    BOBHJV3           BOBHKX2

    Company Description
    HSBC European Absolute Limited is a Guernsey registered closed-ended investment company which was launched on 20 April 2001. The
Company's objective is to seek to achieve equity-like returns with lower levels of volatility. Its policy is to seek to achieve this by
investing in a diversified portfolio of hedge funds and managed accounts exposed to long/short strategies investing predominantly in UK and
European markets which are managed to seek to provide investors with an absolute total return and with a lower volatility than equities
generally. The Company's manager is HSBC Management (Guernsey) Limited ("HMG") and the Company's investment adviser is HSBC Alternative
Investments Limited ("HAIL").  
    Performance (through 31 July 2008)
    Over the last four months the company's performance was down 0.44% in EUR terms and 0.01% in GBP terms.  

    The net asset value (NAV) of the Euro class decreased from EUR 2.1822 at 31 March to   
EUR 2.1726 as at 31 July 2008.  The share price of the Euro class of the company 
increased from EUR 2.10 to EUR 2.15 as at 31 July 2008, an increase of  2.38% over 
the quarter.  In GBP terms, the NAV of the GBP increased from GBP 1.5517 at 31 March 
to GBP 1.5518 as at 31 July 2008.  The share price over the quarter fell from GBP 
1.54 at the beginning of the quarter to GBP 1.53 as at 31 July 2008. 

    The company's portfolio over the quarter was flat against a challenging backdrop for European equities. The beginning of the quarter the
majority of the gains were driven by equity long/short managers. Mining and energy stocks continued to be in favour as the oil price
continued to rise sharply, and positive performance was seen from names which had previously been volatile.  Recovery in financials also
helped certain managers, while companies reporting results in line with managers' anticipations were another driver of returns. M&A activity
also picked up and credit markets began to improve this led to event driven / multi-strategy managers making modest gains. 
    All underlying strategies performed positively with the bulk of gains generated by equity long/short managers.  Managers benefited
strongly from long positioning in the energy and commodities sectors, whilst shorts in financials continued to be rewarding.  

    Towards the end of the quarter hedge fund performance was mixed. Strong positive contribution came from high yield/ distressed managers
who benefited mostly from short credit and equity positions in companies directly impacted by the credit crisis. However, equity long/ short
managers struggled with losses concentrated in those managers focusing on the small and mid cap space as liquidity dried up in this segment
of the market.
    Summary of Portfolio (as at 31 July 2008)

                Summary of Portfolio as at 31 July 2008
               Strategy                 No. of holdings within strategy
           Equity Long/Short                          18
         High Yield/Distressed                         2
      Multi-Strategy/Event Driven                      2
         Total number of Funds                        22


    Market Commentary 

    Global equity markets started off strong at the beginning of the quarter. Financials were notable performers despite further write-downs
and rights issues announcements, followed by food retail and oil and gas. Corporate activity also picked up. There was a level of
uncertainty with in the market as the economy started to slow and housing was faltered while inflation remained problematic.  Commodities
continued to appreciate with a spike in oil prices. 

    Towards the end of the quarter, global equity markets fell severely on swelling inflationary pressure as oil prices reached all time
highs and anxiety about the financial sector increased. In commodities, energy markets reached new heights with Brent crude increasing 9.6%.
The grains sector performed strongly with corn and soybeans making all time highs.

    Within the main fund strategies HAIL believes that on a global basis, equity markets will continue to be challenging. Despite
opportunities for some long and short stock pickers, due to the continuing market uncertainty. Within distressed opportunities it is
anticipated that whilst the number of opportunities is currently limited this may increase over time. While merger opportunities remain
slow, HAIL believe that some sectors which are cash rich have not been as impacted and are expected to continue activity in the space.
Equity market volatility is expected to remain at elevated levels.

    Company Actions

    On the 24th April 2008, the Company processed conversion requests received from shareholders under the conversion facility. 1,707,960
Sterling hedged shares were converted to 1,525,007 Euro shares and 443,137 Euro hedged shares were converted to 496,298 Sterling hedged
shares.

    On the 17th July 2008 the directors of HSBC European Absolute Limited announced that, following consultation with their advisers, that
liquidation proposals were brought forward. A circular will be distributed by the end of August 2008 and will include details of the offer
HSBC Global Absolute Limited as a successor investment vehicle. An alternative full cash option for investors wishing to realise their
holdings will also be available. The circular will provide notice of an extraordinary general meeting.

    At the 30th July 2008 HSBC European Absolute Limited produced their annual report and audited financial statements for the year ending
31 March 2008.

    Contacts

    Investment Adviser
    HSBC Alternative Investments Limited
78 St James's Street
London SW1A 1JB

    Board of Directors
    Ian Domaille (Chairman)
Stuart Mitchell
Michael Quarrington
Stuart Carnegie

    Company secretary, Administrator and Registered Office
    HSBC Management (Guernsey) Limited
St Martins House
Le Bordage
St Peter Port
Guernsey GY1 4AU

    Auditor
    KPMG Channel islands Limited
2 Grange Place
PO Box 235
St Peter Port
Guernsey GY1 4LD











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