HDFC Asset Management Company

vibhor_vaish · January 27, 2022, 10:37am

Considering the levels the “market price” has fallen, was curious on fellow investor views.

Continuous market share loss is a good enough reason for valuations to correct.

But are we perhaps giving too much credit to these smallcases and new age investment businesses.

Have we become too pessimistic even though the mgmt have launched record NFOs in contrast to their past record. Are we not willing to give them a chance to correct their lack of past initiatives.

Markets have been kind to every dumb/smart investor past year. But considering this will be the first time in 4 years US FED will be taking some action , we know volatility is here to stay for good ( and will not be very good for us probably) , do we see many investors losing money and going back to mutual funds to do the job. Wouldn’t HDFC AMC be a beneficiary ?

Disc: Invested

Sudhakar_Subramanian · January 27, 2022, 11:23am

You’re right that market is going to disappoint and most probably punish the new direct equity entrants (after March 2020) who were so far overconfident of their skills in stock picking.

WFH culture may also stop/reduce in another 3 to 6 months which may be the main reason for increase in direct equity play.
Smallcases returns are exaggerated (Google search can show many articles on it) and not ideal and expensive for small investment due to constant churn in the portfolio.

All these will lead people back to AMCs. However market correction will make MF investors to stop or even cash out their monthly SIPs. The cyclical nature of stock market will most probably play through this year.

Will HDFC AMC be able to capture a sizable mkt of MFs investment or will other AMCs gain mkt share? Time can only say.

navneetsinghvi · January 27, 2022, 12:57pm

this is surely a big possibility the way market is rising like anything. a 10+ percent correction will send jitters to new members. In that case, MF will have increase. how much HDFC AMC will be able to eat into that pie, is to be seen.

Investor_No_1 · January 27, 2022, 4:42pm

Just an observation, over last few week, month, HDFC MFs have fared better in the crash as compared to SBI or Axis…
Investors mostly see ratings and near past performances and also a herd mentality via recommendations by colleagues etc. Sbi and axis MFs have ridden the bull market better than HDFC, but that doesn’t and shouldn’t make HDFC MFs a lesser performer for an investor with longer horizon and some patience…
Disc. Overall satisfied customer of HDFC MF. Invested 2% of portfolio. Biased. Evaluating if i should add more now or just let it be…Not a buy/sell recommendation

ChaitanyaC · January 28, 2022, 6:01am

People want high returns with no risk. If that does not happen, they would want lower return with no risk. It is hard to take losses than to miss gains. FOMO works when there is no visibility of loss, in rising markets.

For the past couple of years, markets have been rising, so people who are new to the markets, who have no understanding, who had invested directly in stocks without any MF experience, also made money. Liquidity all through, and the network effect came into play, there by the froth.

Indian markets cannot remain high with domestic participants, we aren’t that big, we aren’t the movers. Foreign participation and exodus make the difference. Yes, informed investors take informed decisions, so these buy when markets fall, but uninformed investors will feel the jitters, because even if they know the reasons for the fall, they did not have a plan, they don’t know if they should stay put or sell. So it is possible that they exit and perhaps wait a long time to go in. And I am not sure, all of these will move to MF.

Second is the performance of the schemes of any AMC, if the majority of the AUM is coming from MFs, SIPs or otherwise, and if much of the AUM is garnered from regular funds, whose advisors are also playing an important part of their clients’ financial management, then probably yes, despite the lack of performance, AUM could remain the same, if not increase. But if the participation even in MFs is because of the new, educated generations, who have the time and inclination to create a good financial life, they initially may wait because of their ties with the advisors, but if the funds don’t perform, they can shift to other funds which they know will serve them better.

So the fall may not be just because of the retail direct participation in the market, which may end sooner than later, but because of the rise of other AMCs for different reasons and the options retail investors have today, which are powerful than the brand name. Of course, the changes, the management is making could reflect in the top line and bottom line sooner, then the valuations again will come back, which obviously are known to the market before they happen.

Yes, compared to debt investments, India has low equity participation, but this is a long journey, which is changing too, as new avenues are being opening up to invest.

Just my thoughts and not invested.

sivaram · January 28, 2022, 8:12am

I believe this is no longer true. DII and retail are crowding out FII. In fact, every time FIIs have moved 9K to 20K Cr out of market, retail and DII have simply bought it out. Now whether that’s a long term play/committment to stay invested by retail/DII, that’s a bit of analysis required.

ChaitanyaC · January 28, 2022, 8:59am

From a broader perspective, we Indians have many avenues to make money, equity is just one among them, as ours is not a formalized economy and the real money lies elsewhere.

So even who are investing through MF route are not informed, educated folk are also misled, and when the resilience of MF investors will be put to test, they may change their mind sooner than later, and rightly so, because choosing an MF route is because they have financial goals, and time is an integral part of such goals. And I guess we cannot take even 5 years ago data of inflows and outflows as a basis here, because a lot has changed w.r.t domestic participation in 5 years.

Choosing direct equity, investing on own is different, but even here, there is misinformation, influences, FOMO, notion of quick gains, all coming into play.

Of course, if a year of sideways market becomes common knowledge, then we could see inflows to MFs sustaining, but if the bigger markets fall, ours will fall too, and if this is not taken into account, we could see more outflows.

Actions of informed investors is visible with ETFs though, good participation on the fall days. This is increasing.

Deliberate purchase of buying a wolf is one thing, and buying a wolf thinking that as it belongs to the same family as dogs, it will behave like a dog, is another thing.

sivaram · January 28, 2022, 11:08am

Why not? Anyone who invested in year 2017(5 yrs ago) MF in the general category of debt,equity and hybrid would have seen close to 50% yield or higher

Markets end 2017 with a bang, Sensex reaches a record high - The Economic Times (indiatimes.com)

And that’s precisely why the stickiness is there this time. and it’s gone up incredibly from 34K to 59K. And I should know and can prove that. I had to sell off my MF to pay loans and loaded them up again in 2017 once I got my insurance maturity payout. Even with my random choices, my returns swing between 50 to 58% profit over the last 3 months.

And if you noticed, we have retraced 18.8K to 17K twice so far similar to multiple back and forth in 14K to 16K range of NSE. Investors have poured on and in. Add the pandemic free cash of IT crowd, it has been a well paying return on the MF side.

Here’s an academic challenge; check the MF AUM every year since 2017 of some popular ones. and then drill down to any quarter where the markets went down. See the dip and bounce in MFs AUM which cant be explained by share price alone.

I put it to you that, there’s still lot of money chasing returns(multibaggers, plodders whatnot) and it will take a sustained downturn for the investors to move out permanently.
Under the current GOI, that seems unlikely.

Just go long India.

ChaitanyaC · January 28, 2022, 1:59pm

I am not talking about investors who had a plan in place, which calls for patience, so they may stay put, even if the markets fall. Informed investors, either who educated themselves and investing in direct funds, or regular funds’ investors who get help from their advisors will not panic and pull out, but they may stop further investments. And when one really knows that volatility cuts both ways, one may think of selling and getting back when prices fall, not exactly market timing but it is hard to see and feel nothing, when gains are becoming less and less, if the fall is consistent, across the board. If it rains, it pours.

More participation is required, because after all, how much can the existing participants invest, and how up can any stock go, and for how long, so new participation is required. And the market has to become big, with new IPOs, existing companies expanding to other geographies as they cannot all cater to India alone. And without new companies in the market, the inflows will be allotted to the same existent companies, with good management, visible earnings growth, sunrise sectors etc, so these will go up. And MFs do not sit idle with the investors’ funds, they have to invest somewhere within the confines of the category mandates. I guess one of the reasons why MFs have started to focus on hybrid funds these days, as they can invest 30%-60% in debt. New ETFs and index funds are launched, with most of the PFs overlapping.

If the reasons for the fall are external, foreign, it will be felt. Liquidity, interest rates, geopolitics, rainfall, government policies, tax collections, expenditure, demand, etc., I guess all are components, domestic and foreign, which are interconnected. I would not say they are dominoes but one will influence the other, if one were to become loose or disappear, the effect will be felt all over. Who would have thought even debt funds will fall along with equities 2 years ago?

The current situation in my view cannot be compared to previous falls or recoveries, this is indeed incomparable, but the measures past and future will be the same. So perhaps the bull may rest this year.

sivaram · January 29, 2022, 6:34am

I’m unable to follow your logic here as you are referring to different things as the discussion progresses. The original posit was about FII exits which in 5 yrs have not a made a dent in DII/retail investment.

And as for the above, I believe you’d have seen the CDSL/Angel One and Zerodha threads where they’re setting records of sorts by adding 30L to 1Crore users every quarter. At last count on some random page of these companies, we have added close to 30M or 3 crore participants. which is mostly direct share trading platforms. A significant amount do MF buys and BSE’s MF STAR has shown record inflows as fund aggregator for all AMCs as retail MF by agents.

This is digressing from the HDFC AMC company discussion and I’ll stop here.

IamAnshul · February 2, 2022, 7:51am

HDFC stocks will always remain overvalued for someone who hasn’t enjoyed the ride Many banks have been touted as the next HDFC but that hasn’t materialized, atleast not yet (Although I like how ICICI bank is currently doing)
On that soft note, would like to add couple of points

HDFC AMC’s decline in market share is attributed to rise in smaller AMCs. If you see the market share of other top AMCs, they haven’t gained much from HDFC’s fall. With the kind of cash reserve HDFC AMC has, I’m sure they’ll go shopping for these smaller AMCs if the trend continues.
Again, not to take anything away from ICICI AMC as it has not diluted it’s market share during the rise of smaller, lesser known AMCs. Would need a deeper look on how they are able to execute it. (A good example if Parag parikh with its skin in the game philosophy)
AMC business is also partly driven by emotions. Having worked with Nippon, I understand that many people have an emotion associated with a particular AMC. The distributor has traditionally carried brand building at grass root level and that has now been taken over by these new age online and digital direct MFs. HDFC will have to move fast with these players in order to retain its dominance - again I don’t see a reason why HDFC cannot do this.
Although Smallcases are on the rise, in my opinion it won’t dent the MF business per se. We can all assume Smallcases to be more cost effective compared to MFs but for an average investor in Indian markets, the upfront cost associated with a good Smallcase doesn’t help its case. There is a rise of financial influencers driving Smallcase use-case with their model portfolios and that will surely drive new investors to the investment world.
AMCs still look up to what HDFC is doing - it has been a leader in all fronts and that tells you a lot about its brand dominance.
Disc : Invested, my views are totally personal.

newone · February 3, 2022, 8:40am

The news article from CNBC says HDFC AMC is also in the race to acquire IDFC AMC. Just trying to understand the rationale behind the interest in IDFC (with a very high proportion of debt AUM) but not in L&T (with good share of active equity AUM)

ranjan10 · February 5, 2022, 5:57pm

I was looking at the Monthly Average AUM for Dec’21 fof HDFC AMC. To me it seems like on ELSS and Other Equity Schemes are Equity-Oriented. If I consider this, Equity ratio comes out to be 32.25%. But company is stating 46%. Where am I wrong?

Category of the Scheme	MA AUM (in Crores) Dec’21
Liquid/Money Market	86,093.01
Gilt	1,532.85
FMP	6,494.30
Debt (Assured Return)	0.00
Infrastructure Debt Funds	0.00
Other Debt Schemes	132,144.47
ELSS	10,597.65
Other Equity Schemes	132,790.70
Balanced Schemes	66,050.62
GOLD ETF	2,881.74
Other ETFs	1,488.16
Fund Of Funds Investing Overseas	1,193.25
Fund Of Funds Investing Domestic	3,345.02

navneetsinghvi · February 6, 2022, 11:53am

Kindly read thread above. you may get lot of insights.

mahesh_s · February 9, 2022, 11:16am

Hi all,

I am an ametuer investor and here to learn.
First of, such a wonderful thread full of business insights, all thanks to @zygo23554 @varun037 @Yogesh_s

With a hypothesis that retail investors look for past performance and rankings to choose mutual funds, I tried to compare performance of HDFC mutual funds with popular options across four equity scheme categories. I realize that there are many more categories not covered yet.

Here is what I found.

Across all four categories HDFC funds did not fare well on a short term (3 years) and long term (more than 3 years) scale. Refer to last two columns starting with “Alpha…”
In large and mid cap schemes, HDFC funds could not beat index.
HDFC mutual funds
Data source: Morning star and valueresearchonline. Excel is attached for reference.

Due to abundant data being available across portals including morningstar, moneycontrol, etc. comparison across funds is quite easy. If majority people go with past performance then things may not be looking too good. Unlike a product business, a “quick fix” to fund performance to make customers like you is not possible. It will take time to regain customer confidence even if they slowly start doing well.

Looking forward to all of your opinions.
Thanks,
Mahesh

HDFC Mutual Fund Comparison.xlsx (22.0 KB)

mahesh_s · February 10, 2022, 10:23am

Just an observation after reading annual reports and con calls of HDFCAMC and ABSL.
The information being shared in pretty standard. It includes AUM growth, distribution channel optimization, business from individual vs institutional, contribution from T30 vs B30 followed by financials.

Here the “product” being offered here is the fund scheme. I am yet to come across material where management is talking about “product’s performance” (NAV). I understand that monitoring NAV on quarterly or even yearly may be futile. However, 3 year and 5 year performance can be indicative.

Trying to applying the famous “4Ps” of marketing here. The first “P”, the product should satisfy customer’s need (in this case, wealth creation or preservation at minimum). AFTER that is sorted, “Price”, “Place (sales channels)”, “Promotion (advertising reach outs)” are important. However, from what I read, I learned more and more “Price”, “Place” and “Promotion”.

Just want to learn if I am missing something big. Is fund’s performance not a key variable along with distribution and AUM growth across B30 cities? Why don’t AMCs talk about scheme’s NAV performance? Is it because number of schemes so high (85 in case of HDFC AMC) that it is inconvenient may be?

What do you think? @zygo23554 @Yogesh_s @Investor_No_1 @harsh.beria93 and everyone

ChaitanyaC · February 10, 2022, 11:11am

Assuming the regular funds’ share is still big, as in the past, and people who choose regular funds are either pursued or recommended by others to invest in MF. So even if the funds don’t perform for a particular period of time, distributors/representatives explain the reasons for the lower returns, underperformance, or no returns, and make the investors stay invested in the same schemes, or change to different schemes. So the PFs still exist, no decrease.

DIY investors, robo advisory investors without any human involvement, I guess don’t have such patience, because there is no person involved, no human interaction, no explanation as to what is happening. But then again, one who does not understand how equity works, who does not have at least a broad understanding, but still started to invest will learn the lessons if the bull market stops, and may want to continue with understanding and a plan, or may jump the boat without coming back.

As it has been mentioned in the thread, the steps taken by the management will reflect after a few quarters, but be it HDFC, Birla, Nippon or UTI, no one has any secret sauce, if their AUM is dependent on Indian retail, unless they are using quantitative models, because Indian MF is also matured, all AMCs managers are experienced, the fundamental, value oriented schools of thought are limited, the market in a sense is small, so there is no specific edge and they have the obvious limitation of not betting too much on one single stock, even if they could see how big the stock is going to become.

Not invested.

Sidhant · February 10, 2022, 11:24am

You are getting 32.25% because you are taking balanced schemes as debt or non-equity schemes.
But in reality they have a mix of debt and equity(and also other asset classes).
For exact calculation you will need to look into each balanced scheme and get equity AUM from it.
Here the company is taking balanced products as equity, you can see the note from investor presentation below.

newone · February 11, 2022, 10:57am

Chris Wood is positive on HDFCAMC but says they don’t hold any shares at this moment

newone · February 18, 2022, 3:21pm

SBI is planning to list it’s mutual fund business in this year. Post listing, I hope it will be clear what’s more important (asset growth or profitability). I gathered below info from SBI & ICICI investor presentation.

As can be seen, SBI had a 9 months AAUM of 5.8 lakh crores which is 32% higher than that of HDFC. But even with such a higher AAUM numbers, their profits were 25% lesser than that of HDFC. (The investor presentation only had PAT numbers and not revenue and hence I don’t know if there were any non recurring expenses that hit the PAT of SBI MF)

Anyways, post listing of SBI, if this trend still continues (on the profitability) then markets may not compare the AUM growth of HDFC with others (this is what Navneet Munot was trying to explain in the con-calls). However, they should charter their own AUM growth path even if it’s not as high as that of SBI.

On the other hand, ICICI has clearly inched ahead of HDFC in terms of both AUM growth and profitability. So I guess Navneet Munot’s main focus should be regaining the no. 2 position and surpass ICICI.