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Our Bureau

Mumbai , April 11

HSBC Mutual Fund launched the HSBC Midcap Equity Fund (HMEF), with a limit of Rs 700 crore on the fund size. This is the first time that an asset management company has fixed a cap on the size of the fund.

Mr Sanjay Prakash, CEO, HSBC Asset Management India, said capping the fund at a manageable size facilitates fund performance and risk management. "The HMEF is a lot tighter than other funds. This is the first fund that is attempting to cap the size, a strategy that will protect the value for investors," he said.

The IPO of the fund will remain open till May 3. The earliest closing date of the IPO is April 13, in case the fund breaches the Rs 700-crore cap.

If the fund crosses the threshold during the IPO, the fund house can close the IPO earlier by giving one day's notice to investors. During the ongoing offer, the fund house can temporarily suspend subscriptions if the fund size is above Rs 700 crore. The fund would remain closed for at least 30 days or till it falls below the threshold level, whichever is later.

HMEF is an open-ended growth scheme that will invest pre-dominantly in mid-cap companies and also in some small-cap companies. Mid-caps are those companies whose stocks are lesser than 0.1 per cent of the total market cap of the BSE-200 Index, as defined by the fund house. The BSE-200 is approximately Rs 14,40,000 crore, which means that no stock with market capitalisation above Rs 1,440 crore can be part of the HMEF, at this point of time.

Mr K.R. Shanbhag, Fund Manager, said: "Mid-cap companies do well in developing economies." As the growth rate is higher in mid-cap companies, they will offer higher returns, though the risks will also be higher, he added.

Mr Sanjiv Duggal, Investment Officer, HSBC Asset Management India, said: "The HMEF will have about 50 to 60 stocks in its portfolio and will be benchmarked against the CNX Mid Cap Index."

About the company's investing policy, Mr Duggal said: "We follow a top down approach. This gives value to the funds. We look at the sector from the top and then pick the stocks within that sector to invest in."

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