HDFC AMC funds: entry in a turbulent phase

The Housing Development Finance Corporation-sponsored HDFC Asset Management Company is currently in the market with the initial primary offerings of three funds: the open-end growth, balanced, and income funds. The issue opened on July 20 and will close subscription on August 10. With the launch of funds from HDFC AMC, the number of asset management companies in the Indian mutual fund market has gone up to 35.

The parent, HDFC, is a leading housing finance company in India with a total size of over Rs 150 billion. For the AMC, HDFC has entered into a joint participation agreement with Standard Life Investments of the UK, which has the option to purchase a 26 per cent stake in the AMC after October 2000. Standard Life, established in 1825, is one of the largest investment companies in the world with an asset base of $115 billion.

HDFC AMC has launched its three funds at a time when both equity and debt markets are witnessing a turbulent phase. In the last fortnight, equity and balanced funds have both seen erosion in net asset values. All the technology funds launched earlier this year, too, are languishing below par which means that investors have yet to see any gains from their investments. On the other hand, even debt funds have seen the NAVs drop after the Reserve Bank of India hiked interest rates on July 21. Thus, the AMC will have to aggressively sell funds to garner an impressive initial collection. While the AMC may argue that it is a good time to invest since the markets are ruling low, whether the markets will rebound from current levels is anybody's guess. At the same time, there are number of funds with quality portfolios, which are currently available at attractive NAVs.

All the three funds from HDFC Mutual Fund have a minimum investment of Rs 3,000 and in multiples of Rs 1,000 thereafter. All the three funds offer dividend and growth options with the facility to switch from one scheme to another. While the growth fund carries an entry load of 2 per cent, the balanced fund will charge a load of 1.5 per cent. There is no entry load in the income fund, though there is an exit load of 0.5 per cent if units are redeemed on or before six months from the date of allotment.

An open-ended equity fund, HDFC Growth Fund will invest 80-100 per cent assets in equities, while restricting exposure to debt to a maximum of 20 per cent. The fund will be benchmarked against the 50-stock S&P CNX Nifty. The scheme has the option to invest in unlisted equities, to the extent of 5 per cent of the assets under management. HDFC Balanced Fund will allocate 60 per cent of its assets to equities while investing the rest in debt instruments.

Source: Value Research

Fund News

Money

Tell us what you think of this report