Notification of changes to the underlying fund of various Mellon Global Bond funds
04 Jun 2026
- P67 Mellon Global Bond (USD)
- H56 Mellon Global Bond (USD)*
(Together the “Affected Mirror Funds”)
We have been notified by the Directors of BNY Mellon Global Funds, plc of upcoming changes to the underlying fund of the Affected Mirror Funds. These changes will take effect from 24 June 2026 (the “Effective Date”).
Change to the risk measurement methodology and increase in the financial derivative instruments limit
Currently, the underlying fund of the Affected Mirror Funds (the “Underlying Fund”) may use financial derivative instruments (“FDI”) for hedging, efficient portfolio management and investment purposes. The use of FDI for investment purposes is not currently extensive.
From the Effective Date, the way the Underlying Fund’s global exposure (market risk due to exposure to FDI) is measured is changing from current Commitment approach to the Relative Value at Risk (“VaR”) approach. It has been assessed that the Relative VaR approach is more suitable for the Underlying Fund as it provides a more meaningful measure of the market risk to which the Underlying Fund is exposed by comparing the portfolio’s risk to that of a representative benchmark. There will be no material change to the Underlying Fund’s risk profile as a result of the change of method of measuring global exposure.
In addition, from the Effective Date, Newton Investment Management Limited, the Underlying Fund Investment Manager, will have increased flexibility to use FDI (including but not limited to certain futures, options, forwards, swaps and other securities with embedded FDI or leverage.) within the Underlying Fund for investment purposes, which may include employing synthetic long and synthetic short exposures in the existing asset classes as referenced in the existing investment policy of the Underlying Fund. As a result, the updated thresholds have been reflected in the table further below.
Consequential risk factors associated with investments in FDI (including general derivatives risks (which include counterparty/credit risk, liquidity, valuation and volatility risk and over the counter transaction risk), high leverage risk (whereby the leverage component can magnify potential negative impacts of changes in value of underlying assets on the Underlying Fund) and risk implementing an active FDI position (whereby FDI positions not correlated with the underlying securities positions held by the Underlying Fund may lead to a significant or total loss even if there is no loss of value of such underlying securities).
Over time, the Investment Manager’s implementation of the Underlying Fund’s investment policy and strategy has evolved to include greater use of FDI. This has been primarily in response to changing market conditions, such as changes to global interest rates, and considerations relating to cost and efficiency of implementing the Investment Manager’s investment views. As a result, the Underlying Fund exposure to FDI may vary over time.
The table below includes details of both commitment and relative VaR approaches, as well as the current and new limits for the Underlying Fund, for reference.
| Current disclosure | New disclosure | Explanation | |
|---|---|---|---|
| Global Exposure Methodology | Commitment approach | Relative VaR | |
| Commitment Approach Limit | 40% of Net Asset Value | 500% of Net Asset Value | Under the current commitment approach, FDI are translated so they correspond to an investment in the underlying instrument of the FDI. The amount of FDI in relation to the Underlying Fund’s Net Asset Value shows to what extent its risk position has changed through the use of FDI. |
| Relative VaR Limit | Not applicable | The Underlying Fund’s portfolio will not exceed twice the VaR on a representative benchmark (i.e., the relative VaR benchmark stated below) (using a 20 Business Day holding period) | Although moving to a Relative VaR monitoring approach, the Investment Manager will continue to disclose and monitor the new commitment approach limit. VaR (Value at Risk) estimates the maximum expected loss of an investment over a set period at a chosen confidence level. Where the Underlying Fund uses the Relative VaR approach, it compares its overall risk of loss to a representative benchmark and ensures its risk does not exceed twice the benchmark’s risk. |
| Relative VaR benchmark | Not applicable | JP Morgan Global GBI Unhedged TR Index | Here it is measured over a 20 Business Day period, which means the calculation looks at potential changes in value over about one month. |
| Gross Leverage Limit | Not applicable | 0% - 1000% of the Net Asset Value. The gross leverage may exceed this target level at times | When the Underlying Fund uses the Relative VaR approach, it must also calculate the maximum level of leverage under the sum of the notional amounts of all derivative contracts in the Underlying Fund’s portfolio. It represents the total potential market exposure the Underlying Fund could have through its use of FDI. Under this regulatory calculation method, this figure can appear high (particularly for interest rate FDI). This may not be an accurate representation of the actual risk within the Underlying Fund as it ignores whether the FDI reduce risk or cancel each other out. |
Emerging Markets Exposure
As from the Effective Date, the Underlying Fund’s investment limit in securities listed or traded on Eligible Markets located in emerging market regions will be increased from 10% to 15% of its net assets. This change will have no material impact in the way the Underlying Fund is currently managed.
These changes will take effect automatically and policyholders do not need to take any action. We recommend that policyholders seek the advice of their usual financial adviser before making any investment decisions.
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Impact to Hong Kong designated policyholders who hold H56 Mellon Global Bond (USD)
The change in permitted net derivative exposure to over 100% of Net Asset Value means that the Underlying Fund will now be classified as a derivative fund. Because derivative funds are designated as a complex product, intermediaries, such as financial advisers and banks, are subject to strict suitability rules when selling them to retail investors. FPIL are also required by regulations to have effective controls in place which includes ensuring that our investors have derivative investment knowledge and experience before investing.
As we are unable to monitor this effectively when a new investor wishes to place an investment in an investment-linked derivative fund, FPIL has placed restrictions on new investment into any FPIL investment-linked derivative fund through our Hong Kong authorised products. Therefore, from the date of this notification, H56 Mellon Global Bond (USD) will be closed to investment from new Hong Kong designated investors.
Existing Hong Kong designated unit holders can continue to hold H56 Mellon Global Bond (USD) however from the Effective Date, it will not be possible to increase the existing unit holding by way of switching into the fund or by contributing premium payments. We strongly recommend policyholders seek the advice of their usual independent financial adviser regarding the ongoing suitability of the Affected Mirror Fund for their investment needs following the change to classification as a derivative fund.
Unless we receive alternative instructions, as of the 23 June 2026 (the “Redirection Date”), any premium allocation which would usually be applied to H56 Mellon Global Bond (USD) will be automatically redirected to H45 JPM USD Money Market VNAV (the “Default Replacement Mirror Fund”). For further information on the Default Replacement Mirror Fund, please see Appendix table in the Sample Hong Kong Offshore designated Client Communication opposite.
If a new switch-in request or request for additional single or regular premium into H56 Mellon Global Bond (USD) is submitted after the Effective Date, we will reject the instruction and will contact the policyholder or their independent financial adviser for an alternative instruction.
We have contacted impacted Hong Kong designated policyholders and their financial advisers with notification; primarily by e-shot, with letters sent by post where we do not hold a valid email, and to those who prefer to receive letters by post. A sample of the client communication can be found opposite.
Should you have any questions regarding these changes, please contact the Investment Marketing Team.
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*Fund variant applicable to Hong Kong designated policyholders.
