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The schemes managed by former HDFC Mutual Fund chief investment officer Prashant Jain continue to remain in the pink of health, a year after the star fund manager’s departure, rewarding investors who have stayed put.
Jain’s funds had made a strong comeback in the post-Covid rally, with his fundamental-driven, value approach and PSU bets paying off after a prolonged period of underperformance between 2015 and 2020. He stopped managing these funds at the end of July last year.
HDFC Balanced Advantage, HDFC Flexi Cap and HDFC Top 100 now figure among the top three in their peer group for the period between August 1, 2022 and September 30 this year, according to Morningstar Direct. The first two have grown their assets by about 33 per cent while that of HDFC Top 100 has risen 18 per cent.
The benchmark Nifty 50 returned 14.4 per cent during this period. “The three strategies ran with a value bias under Prashant Jain and the tailwind of the value approach continues to aid performance,” said Kaustubh Belapurkar, Director, Manager Research, Morningstar Investment Adviser India.
Value has continued to outperform growth in the last one and a half years, with PSU stocks seeing a sustained surge.
While the portfolios have not changed too radically, there have been some shifts. For example, the HDFC Flexi Cap still maintains a distinct large cap tilt. The portfolio has weeded out over 20 stocks, however, and the top 10 stocks, now form 55 per cent of the portfolio as opposed to 37 per cent at the end of July last year. New additions include Apollo Hospitals (3.1 per cent), Dr. Reddy’s Laboratories (1.74 per cent) and Tech Mahindra (1.55 per cent). The fund has reduced its allocation to SBI and L&T by 3.01 percentage points and 2.7 percentage points, respectively. HDFC Top 100 has reduced its allocation to Reliance Industries and Coal India by over 2 percentage points, with IndusInd Bank and Cholamandalam Investment and Finance as two major new additions.
- Also read: HDFC AMC profit up 27% on higher income
Churn ratio
The churn ratios of the schemes are in the range of 15-20 per cent for the last year, according to Feroze Azeez, Deputy CEO, Anand Rathi Wealth. The portfolios of such large schemes typically take three years to build and don’t move much, he said. This may have helped the schemes indirectly.
The HDFC Top 100 is gradually moving towards a blended approach with the fund manager looking to buy growth-oriented stocks at a reasonable price, according to Belapurkar. The Balanced Advantage Fund has become more dynamic as far as its equity allocation is concerned and reduced its value bias somewhat. The Flexi Cap scheme has trimmed its portfolio, as its fund manager Roshi Jain prefers a more concentrated portfolio, he said.
“It may be a bit premature to evaluate how the portfolios will look like going forward. But it is more likely that the funds will fully reflect the investment style of their current managers one or two years from now,” said Vicky Mehta, an independent mutual fund research analyst.
As assets of these funds swell, size could become a constraint. “A fund with smaller asset size is easier to manage than a large-sized one. But in the end, it all boils down to the skills of the manager, his portfolio construction and investment style,” said Mehta.
HDFC AMC has seen a 40 bps increase in equity AUM market share this fiscal to 12.6 per cent till August 2023, according to a note by ICICI Securities.
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