I think we as Investors, specially me, learnt a lot from the recent ILFS issue. Asset quality is overrated when compared to Liability quality. Also, MFs huge exposure to NBFCs and corporates, debt fund crash etc. all were trailers to what could happen or rather what had happened in 2009 ( was not following markets at all in 2009 so was not fortunate enough to learn from it). My biggest learning has been - Rule 1: Invest in the best, invest in the leader. Rule 2:Never forget his rule for any Financial company
Hi
Some update from the SEBI meeting. Quoting from Bloombergquint below:
Side-Pocketing Allowed For Mutual Funds
SEBI has also allowed mutual funds to create segregated portfolios of debt and money market instruments, subject to various safeguards. This facility will be available to mutual funds based on credit events. âCreating segregated portfolio may be optional for mutual funds, but approval of trustees is necessary for activating such a portfolio.â
In market parlance, this is commonly referred to as âside-pocketingâ. It is a mechanism to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio. It prevents the distressed assets from damaging the returns generated from more liquid and better-performing assets.
Allowing a segregated portfolio to be created lets asset managers move bonds which undergo a credit event to segregated portfolio. This prevents redemption panic and will allow the primary portfolio to operate as usual, without any undue liquidity stress.
Kaustubh Belapurkar, Director of Fund Research, Morningstar
Rgds
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AUM of HDFC AMC has grown to 3.38 Lakh Crores in November from 3.06 Lakh Crores in September, thanks mainly due to high inflow in liquid & money market schemes (result of IL&FS crisis). Equity schemes also have shown some growth in November. That of ICICI has remained more or less the same between Sep & November.
I guess the same trend will continue in December for HDFC AMC. Does anyone know the profit margin for such schemes Vs equity schemes, which will reflect in Q3 results?
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| Sl. No. | LIQUID SCHEMES | OTHER DEBT ORIENTED SCHEMES | GROWTH / EQUITY ORIENTED SCHEMES | BALANCED SCHEMES | GOLD EXCHANGE TRADED FUND | OTHER EXCHANGE TRADED FUND | TOTAL | FUND OF FUNDS INVESTING DOMESTIC |
|---|---|---|---|---|---|---|---|---|
| NOV | 92,759.84 | 91,358.80 | 92,147.29 | 61,784.38 | 444.88 | 130.22 | 338,625.42 | 231.83 |
| OCT | 78,127.22 | 92,329.58 | 88,740.44 | 59,656.97 | 443.65 | 104.34 | 319,402.20 | 232.97 |
| % change | 18.73 | -1.05 | 3.84 | 3.57 | 0.28 | 24.80 | 6.02 | -0.49 |
There is only marginal change in equity and balanced schemes (compared with rise in NIFT ~4.8%).
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The management has categorically stated that there would not be any further ICDâs given to any companies. Any further investment would be done in Bank deposits only. Also the amount of ICDâs given to group companies (before IPO) is Rs 415 Cr as of Sept 30th. It is promised that they will try to wind the entire amount by March 2020. This is as per the discussion in the concall. I dont think it is a commitment but atleast the direction would be clear. So I would feel that this is not a big issue for the company going forward. There should be other operational matter which should take precedence in deciding for investment in this stock.
Regards,
Nikhil
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It has been highlighted before in this thread but the revenue model has been explained succinctly in the below screen grab: (could not help but share)
Valuation remains a contentious issue.
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Excellent quote. One thought, I have seen regulations disrupting sectors. Can regulation change where an AMC maybe forced to send a bill to its investors? How would Investors with 1 million dollar invested would react is a million dollar question to me 
Please guide. I feel investments are very thoughtful decisions and back of mind investors know how much they are paying (specially the ones who have 1 million dollar invested). Still I would want to know others view on this. Thanks
I think senior boarders would be better off answering this question. However, IMO it would be an unprecedented move not only in India but globally to send a bill to investors. Although highly improbable, it might put a dent but not significant enough. At a personal level, while selecting funds for SIP, TER was one of the last points of consideration for me. Even after investing, I barely have an idea about the TER of the funds I am invested in.
It might be wrong approach and the sample size is too small, but I hardly notice people discussing expense ratio while talking about MF and returns.
Hi
For what its worth after almost after 11 quarters HDFC again regains the pole position as the top AMC.
rgds
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One thing which always ticked me about HDFC AMC is that while researching for funds on portals like Morning Star, Value Research etc. it is difficult to find HDFC funds in the top rated/performing funds at any given point of time. I did not shortlist or even see HDFC funds while researching while finalising my SIP Investment. I came across this section in a report I am reading currently (screen grab below)
Although it says that âfund performance is imp but not the most determining factorâ , I am not sure what do they exactly mean by this. Would like to hear views from seniors @Yogesh_s @deevee on the same.
Thanks!
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Hi Saurav,
Check below article. It describes mutual fund star ratings system.
Thanks,
Jaimini
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Somehow with whatever little I have invested in MF, I never looked at ratings and stars. I looked at AMC parentage, portfolio, Fund manager history if available, history of Fund performanceâŚ
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Asset management is not a winner-take-all business. Best fund or best fund house does not gather all the AUM. Even the worst fund can manage to win some AUM. In the eyes of the investor, fund performance isnât the only criteria. There are other subjective criteria like service, safety, communication, agent network, ease of investing etc that cannot be objectively rated by a rating agency but matters to an investor when he decides to buy a mutual fund.
Ratings are always relative to other funds in the same category. A fund can be rated 5 star even if it produces negative returns if all other funds in the same category generated even worse returns. Similarly, if a fund produced excellent returns (compared to expectations of investors) it can still be rated 3 star if other funds did better. As long as funds meet investorâs expectations, investors will stay invested. If a fund performs poorly over a long period of time it will lose AUM. Even then, if it produces returns better than the next best alternative available to investor, it can still manage to keep a good part of its AUM.
Ratings begins to matter when equity funds as a category underperform equity indices and equity as an asset class underperform other asset classes especially when adjusted for risk. Thatâs when people begin to shop around. Historically equities and equity funds have done well relative to other asset classes but future is not so sure. So ratings might actually matter in future.
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Q3 results:
In Q3, HDFC AMC has reduced the expenses (upfront commissions etc as per SEBI guidelines). But have they also reduced TER already as per guidelines OR is that to be done only from Apr 1st?
I think it will de done from April 1 onwards only.
Do you happen to know how much the lesser the Q3 revenue would have been if they had implemented them start of Q3 itself? Just a rough ideaâŚ
The stock is now trading at 33x. Do long time investors have any views on todays valuations of HDFC AMC??
It is undergoing time correction and could enter value zone with another 10% cut provided we are in the bottoming out process for the market. I think the negative sentiment is mainly due to receding fund flows while the valuation is secondary. Important to get the probable trend for fund flows for the post election scenario right.
Disc: No holding