Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Friday, May 4, 2012

HSBC Dynamic Fund

Invest Mutual Funds Online

Download Mutual Fund Application Forms

The dynamic environment which we live in today has instinctively made us flexible. We rather prefer to malleable, than rigid given the benefit it has to offer. Assessing the merits of being flexible, today mutual fund houses too are incorporating this aspect as an investment mandate, while managing investors hard earned money. They (mutual fund houses) believe it will help them to manage assets better and improve the overall performance of the fund. There seems to be recognition to the view that, instead of being static in asset allocation (by following a set asset allocation range across asset classes), it is better to go fluid while managing investors hard earned money, as an adverse turn in the equity markets, can prove fatal while managing wealth.

Mandated to follow a flexible investment style, HSBC Dynamic Fund (HDF) is one such open-ended fund that aims to invest predominantly in equities under normal circumstances but may quickly move 100% of its assets in debt and money market instruments. The HDF may also use derivatives with an aim to protect downside risk when the fund manager holds a bearish view on the equity markets. HDF follows the blend style (i.e. combination of growth and value) of investing and has been in existence for over 4 years now.

 

Fund Profile & Investment Decision Snapshot

Type of scheme

Open-ended

Category

Diversified equity

Sub-category

Flexi Style

Style

Blend

Launch date

24-Sep-07

Risk-Return proposition

Low Risk-Low Return

 

Investment Objective and Proposition

The fund's primary investment objective is "to provide long term capital appreciation by allocating funds in equity and equity related instruments. It also has the flexibility to move, entirely if required, into debt instruments in times that the view on equity markets seems negative."

 

Portfolio Characteristics

In the last one year, exposure of HDF to large caps has ranged between 76.0%-91.0% of its assets. While its midcap exposure was has been in the range of 5.0%-14.0%. However, despite being a dynamic assets fund, its exposure to debt and cash has remained in the range of 1.0%-19.0%. In other words, for the most part of the year, the fund held above 80% of its portfolio in equities.

While buying stocks for its portfolio, HDF follows a combination of top down and bottom-up approach whereby Investments are pursued in select sectors based on the investment team's analysis of business cycles, regulatory reforms, competitive advantage etc. While shortlisting stocks from among these sectors, the fund manager focuses on:

  • Fundamentals of the business
  • Industry structure
  • Quality of management
  • Sensitivity to economic factors
  • Financial strength of the company
  • Key earnings drivers.

HDF also invests in various debt instruments issued by corporate, banks, and/or state and central governments. While investing in debt, credit worthiness of the issuing entity is assessed. This credit evaluation includes a study of factors such as the following amongst others:

  • The operating environment of the company
  • Past track record as well as the future prospects of the issuer
  • Short as well as long-term financial health of the issuer

Equity Portfolio

Holdings

Oct 2011

Nov 2011

Dec 2011

Jan 2012

Feb 2012

HDFC Bank Ltd.

7.6

7.5

6.5

6.5

6.6

Grasim Industries Ltd.

5.0

5.1

5.6

5.6

6.1

Infosys Ltd.

6.3

6.2

6.1

6.1

6.0

ITC Ltd.

7.2

7.4

6.6

6.6

5.8

Reliance Industries Ltd.

6.0

5.8

6.0

6.0

5.2

Bharti Airtel Ltd.

5.1

5.5

5.1

5.1

5.0

ICICI Bank Ltd.

4.2

3.5

4.4

4.4

4.5

State Bank Of India

3.4

3.4

4.0

4.0

4.4

Bank Of Baroda

3.9

3.8

4.0

4.0

4.4

Larsen & Toubro Ltd.

4.2

4.1

4.2

4.2

4.3

 

As per the portfolio disclosed on February 29, 2012, the fund holds in all 28 stocks. Top-10 stocks constitute 52.2% of the portfolio, while its exposure to top-5 sector concentration has been 43.7% of its total portfolio. As on February 29, 2012, the large caps constituted 90.7% of the portfolio, while its exposure to mid and small caps was 7.0%, cash and cash equivalents assets were to the tune of 2.3% of the total portfolio. The fund manager of HDF has moderately churned the portfolio which is revealed by its portfolio turnover ratio of 1.4 times which is considered moderate.

Scheme Name

6-Mth (%)

1-Yr (%)

3-Yr (%)

5-Yr (%)

Std. Dev. (%)

Sharpe Ratio

ICICI Pru Dynamic(G)

7.2

-3.8

25.1

10.7

5.85

0.30

Franklin India Flexi Cap(G)

3.3

-7.3

24.3

9.4

7.55

0.24

Birla SL Equity(G)

2.8

-10.4

19.5

5.9

7.91

0.19

DWS Investment Opp(G)

0.7

-11.6

14.6

7.9

6.91

0.15

Bharti AXA Equity-Reg(G)

2.6

-6.8

14.2

-

7.78

0.15

HSBC Dynamic(G)

2.4

-8.4

13.4

-

5.38

0.15

BSE-200

3.6

-9.4

19.2

6.6

7.92

0.19

 

How HDF has fared vis-à-vis its peers

 

The table above reveals that HDF's performance has been dismal. Over a 3-Yr time frame, the fund has generated returns at 13.4% CAGR, thereby underperforming its benchmark index – BSE- 200 with a distinct margin. On the volatility front, the fund has exposed its investors to low risk (as revealed by the Standard Deviation of 5.38%) thereby being less volatile than some of its peers in the category as well as its benchmark. On the risk-adjusted return parameter (as gauged by the Sharpe ratio), the returns appear ordinary in comparison with its peers as well as its benchmark.

Performance across Market Cycles

BULL PHASE

BEAR PHASE

BULL PHASE

CORRECTIVE PHASE

24-Sep-2007
-
09-Jan-2008

09-Jan-2008
-
09-Mar-2009

09-Mar-2009
-
05-Nov-2010

05-Nov-2010
-
12-Apr-2012

HSBC Dynamic (G)

28.2%

-49.6%

52.2%

-12.2%

BSE-200

31.4%

-59.0%

84.4%

-13.6%

 

Study of performance across market cycles reveals that HDF has performed reasonably well during the bear and corrective market phases. However, it has failed to outpace its benchmark in the bull market phases.

 

Fund Manager Profile

Name of the Fund Manager

Mr. Tushar Pradhan (Equity)

Mr. Sanjay Shah (Debt)

Total Work Experience

Over 16 years

Over 10 years

Managing the fund since

Sep-11

Aug-09

Qualifications

B.com, MBA (USA)

B.com, ACA

Although HDF has been less volatile than its benchmark- BSE 200; it has completely failed to impress on the returns front. Its consistent underperformance makes it one of the worst performing funds in the category of flexi cap and dynamic assets funds. To sum up, HSBC Dynamic Fund, despite having a mandate to manage investors' money in a flexible style, hasn't able to provide advantage to its investors, when compared to the other funds in the category. Hence, we believe investors would be better of avoiding HSBC Dynamic Fund.

-------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

 

Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts