| Type |
Open ended
|
Nature |
Diversified (Equity)
|
| Min. Investment |
Rs 5,000 |
Face value |
Rs 10 |
| Entry Load |
2.25% (Maximum) |
Exit Load |
Nil |
| Issue Opens |
Feb 28, 2005 |
Issue Closes |
Mar 21, 2005 |
To generate capital appreciation in the long term through equity investments by investing in a diversified portfolio of Mid Cap and Large Cap "blue chip" companies.
| Instruments |
Normal Allocation |
| Equity |
85% to 100% |
| Debt |
upto 15% |
| Money Market |
upto 15% |
|
With equity markets experiencing rallies in specific stock segments (for example in the mid cap segment in the recent past) as opposed to broader "across the market" rallies, fund houses have woken up to the need of having "flexi-cap" funds to their stable. HDFC Premier Multi-Cap Fund (HPMF) is the latest addition to the "flexi-cap" segment. HPMF will be an apt investment proposition for investors who have a flair for investing in high risk investment avenues.
What is a flexi/multi cap fund? Click here
While few would dispute the benefits of granting flexibility to the fund manager by allowing him to invest in stocks across market capitalisations; this flexibility can come at a price - volatility. Also investing a significant portion of the corpus in stocks from the mid cap segment exposes the fund to higher risk levels, as these stocks are under-researched and illiquid vis-à-vis large cap stocks. Investors would do well to factor in the risk-return trade-off before making any investment decision.
Another factor which investors must consider is the proportion of mid cap holdings in their portfolios. The surge in the mid cap segment has led to quite a few funds which were originally positioned as "diversified equity funds" change tracks and go overboard in the mid cap segment. Investments in funds of the flexi-cap variety can further contribute to the lop-sidedness of investors' portfolios.
|
HPMF has broadly divided its portfolio in three parts i.e. the portion invested in large cap stocks, the mid cap stocks and the flexible one. The fund intends to invest at all times 35% of its corpus in large cap stocks; large caps have been defined as companies whose market capitalisation exceeds the range specified for CNX Midcap 200. Investments in large cap stocks are intended to provide stability to the portfolio. Similarly 35% of the corpus will be invested in stocks from the mid cap segment; HPMF defines the same as companies "included in the CNX Midcap 200 index or ones that fall within the market capitalisation requirements of the index".
Market
Capitalisation |
Minimum
Allocation |
Maximum
Allocation |
| Large cap holdings |
35% |
65% |
| Mid cap holdings |
35% |
65% |
| Variable holdings |
30% |
| Debt securities |
0% |
15% |
| Money market inst. |
0% |
15% |
|
The balance i.e. 30% of the corpus will be invested either in the large cap or mid cap segment depending on the season's flavour. Hence the fund has earmarked nearly one-third (a sizeable portion) of its portfolio as the flexible component.
HPMF is mandated to invest upto 15% of its corpus in each of debt and money market instruments; also the fund will always hold a minimum 85% investment in equities. It intends to invest in "blue chip" companies across market capitalisations. However the fund has failed to categorically define "blue chip" companies.
|
Mr. Dhawal Mehta is a Senior Fund Manager with HDFC AMC Mr. Mehta is a CFA (AIMR) and holds a PGDM from IIM (Kolkata). He has over 12 years of experience in the financial markets mainly in the areas of equity research and fund management. Between October 1999 and December 2004, Mr. Mehta was associated with Alliance Capital AMC as the Vice President & Portfolio Manager.
He joined HDFC AMC in January 2005 and manages HDFC Core & Satellite Fund,HDF TaxSaver among others.
|
We believe HPMF will be a typical high risk-high return investment proposition. The fund house has a history of delivering smart performances in equity-oriented funds of the Sensex plus (e.g. HDFC Top 200) variety, balanced (HDFC Prudence) and those investing predominantly in the mid cap segment (e.g. HDFC Capital Builder); also the fund house is strong on systems and processes which will come into play in HPMF as well.
Investors must be aware that a fund of the flexi-cap variety is generally exposed to considerably higher risk levels vis-à-vis a conventional large cap diversified equity fund; HPMF will be exposed to the same risk levels.
We recommend that investors who are willing to take on near term risk consider investing in this scheme. Of course the allocation to this scheme has to be made keeping in mind your current asset allocation.
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