HSBC Dynamic: Sell

Performance that lags both the benchmark and peers as well as and low consistency in its track record of returns plague the HSBC Dynamic Fund.

The scheme , which originally started out as a multi-cap fund in the market highs of 2007, moved on to become a large-cap oriented one after the 2008 crash.

But this orientation has not helped the fund do well even in rallies led by large-caps lead rallies such as the one in 2013. It contains losses better than the Sensex and Nifty in falling markets, but returns have been insipid otherwise.

The fund has clocked only about 0.80 per cent returns since inception. Unit holders can part with their investments in the fund.

HSBC Dynamic has become more focused on large-caps over the last 3-4 years. The BSE 200 remains its benchmark though.

Over the last one-, three- and five- year periods, the fund has failed to beat its benchmark. In this period, the fund’s returns trail the benchmark by 2-7 percentage points.

Its track record in rallies also remains uninspiring. The fund’s equity allocations vary from 70-95 per cent across market cycles, and failure to time the markets appropriately has had it lagging in rallies.

Secondly, it holds 80 -90 per cent of its stocks in large-caps, missing out on any rallies lead by mid-caps - 2012 being a good example.

To its credit though, the large-cap focus came to its rescue in the 2011 fall, where it was able to contain losses better than not only the benchmark, but also the Sensex and Nifty.

This good show in parts, fails to carry the fund safely home because of the lack of consistency. On a rolling return basis, the fund has done better than the BSE 200 only 33 per cent of the time in the last 5 years.

At any point in time, HSBC Dynamic has a compact portfolio with about 20-30 stocks, of which less than five are mid and small-caps.

But it did not get some sector and stock calls right. For instance, since 2009, the fund has held only around 5-10 per cent consumer non-durables, a top performing sector in this period.

Similarly, it reduced exposure to winning software sector in 2013, paring holdings in stocks such as HCL Technologies and TCS. Lupin was another stock in which it regrettably reduced exposures during the year.

Over the last five years, the fund figures steadily among the laggards, in the last quartile of diversified funds. Investors looking for large-cap funds can go with superior and more consistent performers such as ICICI Pru Focused Bluechip Equity or Birla Sun Life Frontline Equity.

The NAV per unit of the growth option is Rs 10.4.