Such things will keep happening and different horses keep galloping first or second…what matters is to remain in race. I have some position in HDFC midcap opportunities fund and so far feel comfortable with performance. It’s 10 years cagr is one of the best (although I am not holding since 10 years )
Also, important to note that HDFC pension fund which manages for NPS is part of HDFC Life.
Disc. Invested in HDFC Life and AMC. Not a recommendation to buy/sell
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True. The definition of long term has increased now. Nilesh Shetty from Quantum Long term equity MF scheme which is into value oriented category recently told even 7 year horizon may not guarantee inflation & FD beating returns. Earlier, the definition of long term is 7 years for smallcap, 5 years for midcap and 3 years for largecap.
Yes, HDFC life manages the HDFC pension fund. The reason why I shared this is the expense ratio of pension funds is around 0.01% and these funds are beating large-cap MFs and NIFTY 50 on 5 year horizon. This can put AMCs at a disadvantage sometimes.
A look at SBI pension fund AUMs is compelling me to study insurance sector more.
https://www.valueresearchonline.com/nps/performance/
Dis - Invested in HDFC AMC. Tracking Insurance sector.
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Mr Nilesh Setty has every reason to say this, because his fund quantum long term equity has failed to beat its benchmark as well as its peer group on a 7 year time period… and just matches the benchmark on 10 year basis
I understand and appreciate what you shared. Why I mentioned that HDFC Pension fund comes under HDFC Life is that many people get confused that Fund would come under AMC. Also, another thing good to know is that SBI Pension Fund is a separate entity and not a part of the listed SBI Life. Pension funds would grow as a business in times to come. Listed HDFC Life gives us exposure to this segment also.
Disc: I am biased as HDFC Life is one of top 3 holdings. Not a recommendation to buy/sell.
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Here is some explanation of why Quantum mutual fund was not performing. In fact, it explains what has changed in Indian stock markets after 2014.
This category(value) did perform well after Lehman brothers collapse and was on par with top MF schemes till 2018 for 10 year horizon if I remember correctly. In the book “The intelligent investor” , it is explained about phases of market euphoria where valuations completely become insane but then they may mostly will not last forever in that mode. Take examples of 2000, 2003, 2008 etc. The bubble builds and then after sometime sanity prevails. Please don’t consider that I am against growth investing. I have growth investing stocks in my portfolio. I am only trying to explain what happens if we buy say a good company like Page industries at 35K or Eicher Motors at 32K(52 week high - recently stock split happened). We may not even recover our invested capital leave about earning on top of it.
My hunch is value oriented category is going to be the flavour of the season soon - “Horses for the courses”. The recent fund manager Mr. Amit Ganatra in HDFC AMC is also from Value category.Good move by HDFC AMC here.
Again, we don’t need to show sympathy for the fund manager/fund house for whatever reasons they could not deliver and stay invested in it. I use the tag line of Capgemini here - “People matter, results count” 
Apologies in case, this is not adding value to this thread.
Disclosure - Invested in Quantum Long Term Equity fund and HDFC AMC
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Hello Vinay,
My 2 cents, let me explain you of how it works. I work as Fund Accountant and have experience in calculation of Management Fees and Expense ratio
While i have not studied HDFC AMC model in detail and assume what i do in US/UK funds is applicable to here as well.
The way Expense ratio is charged is daily NAV
For eg Day 1 AUM is 100 and expense ratio is 2 %
The calculation will be 100x0.02x1/365
Say on Day 2 the Aum is 105 (due to new subscrption and price increase)
The calculation will be 105x0.02x1/365
So on so forth
The Management fees or any expense cannot be charged for whole year right at upfront for following reasons
1-what if u subscribe in Jan and redeem in March, in that case the Asset was unfer Management for only 3 months
2- If any expense ratio is charged for whole period say upfront on day 1, then AMC loses out on fees if the Fund performs well and Consequently AUM increases and investor will lose out if fund doesnt perform well
Daily charge of expense smoothens things out and is benefecial to both AMC and investors.
Also if we were to think in philosophical sense (for lack of better word) , The Management fees /Expense ratio is the best income and business.
Whether or not investor makes money, the AMC will make money
Lets considee hypothetical example
U invest 100 rs in year 0 and lets assume your NAV is 90 in year 1 (due to fall in market) and 100 in year 2 before considering management fees for sake of simplicity
So u havent made a single penny, but AMC make 2 rs in year 0 , 1.8 in year 1 and again 2 rs in year2
At the end of year 2 your net NAV will 94.2 . So you effectively lost money and AMC made money
The amount will be slightly off as will be charged daily.
Also another point to ponder on is why AMC is best business. lets assume the your 100 in years 0 increases by 10 % every year, the fund will charge 2 % as applicable, but you got to understand that fund charges 2% till eternity on your 100 and any increase/decrease that follows
So if you are in for 3 years then you pay out 6% out of 100 and adjusting it for plus or minus 2 % on any decrease
Warren Buffett became worlds richest person from charging performance fees and that should tell you something about AMC business
Disclosure :HDFC AMC used to be my third biggest holding till monday, had to sell for some other reason and will buy back whenever i get a chance
Thanks
Harsh
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Thank you Harsh for explaining this simple yet perplex topic of expense ratios with such clarity
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I think this Quantum guy has blabbered more for the less. IMO, their process explanation is an eyewash to less experienced folks but a laughing riot for knowledgeable.
They in the name of process bought Yes bank during fall around Rs. 100/- without understanding the reason of fall and exited the Yes bank when it touched life time low of around Rs 6/-. And they talk about process in place! hmmm. I have seen and monitoring their portfolio for many years. They slept on keeping laggards like ONGC for a decade in the name of value till it got destroyed to level of Rs. 50/- and only to see this out recently.
IMO they need serious rethinking about value investing vs value trap for the hard earned money of investors. Its not about return but what process they have in place to check the companies fundamentals! that is the big question, I exited this fund long back and is not worthy of investment in mutual fund. Better proposition would be to invest in just one company like consistent compounder than investing in this fund. I may sound harsh but that’s the fact for many such funds.
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Good comparison of two listed AMC businesses.
https://finmedium.com/2020/08/hdfc-and-nippon-amc-comparison/
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My limited knowledge suggests fund houses change the names of the scheme rather than invest in
shady small caps…this was happened last time also…
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AMC can have only one fund in single category if AMC changes scheme name then it will loose investors who wants to invest in multicap funds. Not a feasible option I guess
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AMCs have two options: merge funds to ensure that the existing portfolio doesn’t undergo a huge modification, or rebalance them based on the proposed norms, which require minimum 25 per cent allocation each to large-caps, mid- and small-caps. In the first case, Belapurkar says AMCs may be at a loss if the blended total expense ratio or TER reduces upon the merger of schemes. In the second case, there could be redemptions from the fund, which may entail capital gains tax (cost) for unit holders and loss of business for AMCs.
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From what I can understand, there seems to be an ongoing trend of people switching to passive / index funds, opposed by the trend of financialisation of savings. HDFC AMC ought to be well placed to capitalise on the latter given the distribution advantages. The current dip in AUM should be a short term blip due to the stock market fall, and would be an opportunity to buy if the long term trend remains intact.
Does anyone have any information / links for AMC performance in developed economies over the past few decades? That should be an indicator of the broad resilience of the business model?
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Hi,
Details of recent buys and sells for HDFC AMC
Thanks,
Deb
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is it considered to be good or bad?
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@navneetsinghvi - In my humble opinion, it does not necessarily matter - The above information is good to have/know if you want to coattail their investments. They may have a lot of reasons based on which they are taking buy and sell calls into their investments. From a timing perspective - if they want to do it all in one go v/s different time slots, new regulations, research discovery on a particular company, sector rotation, thematic bets, etc… I would take it with a pinch of salt.
For us as investors in the company, points worth monitoring & analyzing on, are like - is the over all AUM increasing or decreasing, # of funds being launched/closed, expense ratios, the impact of rules and regulations, changes bought in by SEBI, AMFI, how are distributors being paid, contributions, etc. is what we should be concentrating on.
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Sorry but why it does not matter unless one is a 1 stock investor and knows only HFDC AMC as a stock and is incapable to understand market.
The fund selection of stock, the sector in focus and fund performance are KEY to determine where the overall direction is headed.
Like investor of HDFC AMC stock want stock price / earning performance likewise investor in HDFC AMC fund also want fund performance which in turn correlates with stock selection.
Stock selection is for AMC what Underwriting skills is for Banking/NBFC.
edited …
BTW
5 yr SIP returns in HDFC MFs (source:valueresearch)
HDFC Top100: 3.62%
HDFC Equity: 2.91%
HDFC Focussed: 30 0.15%
HDFC Growth Opp: 4.22%
HDFC Midcap: 6.77%
HDFC Smallcap: 6.07%
& finally
HDFC Sensex Index fund: 8.57%
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Just the rumour of Prashant Jain exiting the AMC has brought new life in the stock which was precariously poised to break the 2k level. He has denied it but PSU stocks are getting the stick due to potential dumping. So much for VALUE investing! All these stocks will start doing well as soon as he makes an exit.
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he was once considered best …now suddenly why people are so hell bent of his exit.
how even his exit will make hdfc funds better ?