PRUDENCE is one of the most important words in a bank's vocabulary. Around it a bank can build or destroy its reputation.
No one guards its reputation as a prudently managed operation more jealously than HSBC (Holdings), the biggest institution in the territory and now one of the world's biggest banks.
So it comes as something of a surprise that the bank has defied conventional wisdom in managing its staff pension fund by opting to run the fund through one manager - namely its own.
HSBC Asset Management, which is wholly owned by HSBC (Holdings), is solely responsible for managing the bank's pension fund for about 11,000 local staff, and that fund has racked up a shortfall over the past five years amounting to several hundred million dollars.
Fund managers are mortal like the rest of us and can make the wrong calls. But it is accepted by most in the financial industry that risks should be laid off where possible, and one way is to spread the funds around a few managers.
As one leading actuary commented: when a fund gets to a certain size, it is prudent to have more than one fund manager running it. His remarks should not be taken lightly.
