HDFC AMC on launch spree
It has launched 4 equity funds in last few months, against 5 in 20 years
HDFC Asset Management Company (AMC) is banking on new products to arrest the slide in its market share. Towards this end, it has launched four equity funds in the last few months.
To put that number in context, the country’s second biggest fund house in terms of assets under management (AUM) launched only five actively-managed equity schemes between 2001 and 2020.
Market observers say HDFC AMC is tweaking its style under the new leadership of Navneet Munot, who took over in February from Milind Barve after his 12-year reign, with an eye on both short and long-term benefits.
The former chief investment officer (CIO) of SBI AMC, the country’s largest fund house, joined at a time when HDFC AMC, which commands premium valuations in the listed space, had seen its AUM market share drop nearly 200 basis points (bps) in the year ended June 2020.
Shares of HDFC AMC have underperformed the market as analysts have cut back their earnings growth forecasts. In the past year, the stock has gained 26 per cent, as against 48 per cent for the Sensex. So far this year, the stock is up just 4 per cent, even as the Sensex has risen 21 per cent. Listed peer UTI AMC’S stock has more than double this year, while Nippon India AMC has gained 36 per cent.
Experts say Munot’s key challenges will be increasing market share, adding new investors, and shrugging off the negative image caused by the underperformance of its key schemes. The experts add that HDFC AMC’S equity fund performance has started to improve, which would help it attract flows in the coming months.
Kaustubh Belapurkar, director — manager research, Morningstar India, says, “In terms of the performance, we all know that Prashant Jain (CIO and executive director) has largely been a value investor. This investment style was out of favour till last year, although the funds were well managed. Just that the market cycle was not conducive for his style, resulting in underperformance.”
He adds that the funds Jain managed did very well between 2014 and 2016, but faced a tough time between 2018 and August 2020 as growth stocks were in demand. “The performance of a few of HDFC AMC’S flagship funds underperformed relative to the benchmark indices and peer group. But since late 2020, the value theme came back in favour,” he adds.
Data from Morningstar shows that HDFC Top 100 fund managed by Jain saw significant underperformance between 2018 and 2020. But in the last one year it has matched the market, with returns of 48.4 per cent compared to category average of 50.5 per cent, shows the data from Value Research.
Despite witnessing ups and downs, HDFC Top 100 Fund has managed to generate returns of 19.3 per cent since its launch in October 1996.
“There has been a significant improvement in the performance. Some of the funds are in top quartile or in top decile in the last one-year performance. Even the performance over three and five years has started looking good and is being recognised by our distribution partners as well as clients. We have been making efforts on all counts, including better connectivity with our partners, to spread this message,” Munot said during the earnings call for the June quarter.
Market players say improvement in existing scheme performance and launch of new schemes will help the asset manager regain lost ground. It has launched schemes in categories such as thematic funds, passive products, and international funds.
During the earnings call, Munot said: “In some of these categories our product bouquet was not full, but over the last couple of quarters we have launched a few products. We are going to have some more products over the next several quarters.”
The fund house has launched products such as HDFC Dividend Yield Fund, HDFC Asset Allocator FOF, HDFC Banking & Financial Services Fund, and HDFC Nifty50 Equity Weight Fund.
“And we believe that these efforts, including the performance improvement, would be noticed by the market and we should be able to see gradual improvement in market share,” Munot had said.