HDFC Asset Management Company Ltd (HDFC AMC) was incorporated on December 10, 1999, and was approved to act as an Asset Management Company (AMC) for the HDFC Mutual Fund by Securities and Exchange Board of India (SEBI) on July 3, 2000.

The company is also registered under SEBI to provide Portfolio Management Services. HDFC AMC operates as a joint venture between HDFC Ltd and Standard Life Investments Ltd.

Operations

The HDFC AMC through organic growth and acquisition of Zurich India and Morgan Stanley MF, grew to become one of the top AMCs in India with Assets Under Management (AUM) at Rs 2.92 trillion.

With the said AUM, the company is the second largest AMC with a market share of 13.7% as of FY18. The company’s profitability has been growing since the first full year of operations in 2002.

In terms of asset class based funds, the company has been the largest AMC in India for equity funds accounting for a market share of 16.8% as on FY18.

Key Details

Launch Date
10th December, 19999
Managing Director Renu Karnad
CEO Keki Mistry
Number of Schemes 133
Sponsor
Housing Development Finance Corporation Ltd. / Standard Life Investments Ltd.
Asset Managed
Rs. 334964.10 crore (Dec-31-2018)

The Key People

These are the key people at HDFC AMC

1.Deepak Parekh

Deepak Parekh is the Non-Executive Director and Chairman of the company and has been on the board since 2000.

Also, Mr. Parekh is the Non-Executive Director and Chairman of one of the promoters, i.e., HDFC Ltd. Mr. Parekh is an associate of the Institute of Chartered Accountants (England and Wales).

The Government of India conferred Mr. Parekh with Padma Bhushan in 2006.

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2.Keki Mistry

Keki Mistry is the Non-Executive Director of the company and is a director on the board since 2007.

He is also the Vice-chairman and Chief Executive Officer of HDFC Ltd. He is a fellow of the Institute of Chartered Accountants of India.

Also, Mr. Mistry is the chairman of the CII National Council on Corporate Governance and a member of the Committee on Corporate Governance set up by SEBI.

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3.Renu Karnad

Renu Karnad is a Non-Executive Director of the company and has been on the board since 2000.

Also, Ms. Renu is the Managing Director of one of the promoters – HDFC Ltd.

4.Norman Keith Skeoch

Norman Keith Skeoch is a Non-Executive Director of the company and is a nominee of Standard Life Investments and has been on the board since 2005.

5. Prashant Jain

Prashant Jain is the Chief Investment Officer of HDFC AMC.

He is associated with the company for over 14 years since June 2003.

He was appointed as the Chief Investment Officer in July 2004. Before joining HDFC AMC, he was associated with Zurich Asset Management Company (India) Pvt. Ltd. and SBI Mutual Funds Management Pvt. Ltd.

Consistent Market Position in the Mutual Fund Industry

The company’s AUM has grown at a compounded annual growth rate (CAGR) of 33.9% since FY01 to Rs 2.92 tn in FY18.

Between FY14-18, the AUM grew at a healthy CAGR of 26.6%.

The company has remained among the top two AMCs consistently since August 2008 in terms of total AUM.

Also, the AMC is the largest AMC in India for the past seven years by equity-oriented AUM. Of the total AUM, equity portfolio accounted for 51.3% as on FY18 which is higher than the industry average of 43.2%.

Multi-Channel Distribution Network

HDFC AMC offers a wide range of products. This includes 133 schemes that are classified into 27 equity-oriented schemes, 98 debt schemes, three liquid schemes, and five other schemes.

The products and services are distributed through a multi-channel sales and distribution network comprising of banks, national distributors and independent financial advisors (IFAs).

For fiscal 2018, the IFAs generated 27.6% of its AUM, followed by national distributors at 21.0% and banks at 17.3%.

Having said that, direct plans account for the majority – 34.1%.

Performance

HDFC AMC has consistently remained one of the most successful AMCs in India since FY13 owing to the high share of equity-oriented AUM, cost efficiency and diversified product mix that is distributed through a multi-channel distribution network.

Over the years, majority of the schemes have successfully beaten their benchmark indices.

Talking of the performance, the company has earned a healthy EBITDA margin (assessment of the firm’s operating profitablility) of 48% in FY17 and a staggering 55% in FY18 which is way higher than its peers. Profit as a percent of AUM was 25 bps in FY18 vs. ~20 bps for peers.

Strong margins make the AMC one of the most profitable AMCs in India which has also resulted in the company generating superior return ratios with return on equity being 40%.

Prominent Fund Managers

Mr. Prashant Jain

Mr. Prashant Jain, CFA is the Chief Investment Officer, Executive Director, and Fund Manager at HDFC AMC. Mr. Jain joined the firm on June 20, 2003.

Before joining HDFC AMC, he was the Chief Investment Officer, Head of Funds Management, and Fund Manager at Zurich Asset Management Company (India) Private Limited.

He also had a string with SBI Mutual Fund as Fund In-Charge from 1991 to 1993. Mr. Jain received a PGDM from the Indian Institute of Management, Bangalore and a B.Tech degree from the Indian Institute of Technology, Kanpur. He is also a Chartered Financial Analyst (CFA) charter holder.

Mr. Chirag Setalvad

Mr. Chirag Setalvad is a Senior Fund Manager of Equities at HDFC AMC.

Before joining HDFC AMC, he was the Vice President at New Vernon Advisory Services Pvt. Ltd. He received a B.Sc degree in Business Administration from the University of North Carolina, Chapel Hill.

Mr. Shobhit Mehrotra

Mr. Shobhit Mehrotra is the Head of Credit and Senior Fund Manager of Fixed Income at HDFC AMC.

Before joining HDFC, he was associated with Templeton Asset Management (India) Pvt. Ltd. and ICRA Ltd. Mehrotra received an M.S., M.B.A., and a Bachelor’s Degree in Technology from Clemson University.

Mr. Vinay R. Kulkarni

Mr. Vinay R. Kulkarni serves as a Senior Fund Manager of Equities at HDFC AMC.

Before joining HDFC AMC, he was associated with Tata Asset Management Ltd, Deutsche Asset Management (India) Pvt. Ltd., UTI Asset Management Company (Pvt.) Ltd. and Patni Computer Systems Ltd. Kulkarni received a PGDM from the Indian Institute of Management, Bangalore and a B.Tech degree from the Indian Institute of Technology, Bombay.

Mr. Anil Bamboli

Mr. Anil Bamboli, CFA is a Senior Fund Manager of Fixed Income at HDFC AMC.

Previously, he was associated with SBI Fund Management Pvt. Ltd. Mr. Bamboli received an M.M.S degree in Finance and a B.Com degree. He is also a CFA charter holder.

Best Funds From the AMC

Following are some of the best funds from the AMC

1.HDFC Equity Savings Fund

Objective

The fund aims to provide capital appreciation by investing in equity and equity related instruments. The scheme also scouts for arbitrage, as well as debt and money market instruments.

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Category

Hybrid: Equity Savings

Snapshot

Why Invest in This Fund?

The fund has beaten its benchmark over the three year and five year time period. The fund has managed to outperform the category average over the multi-trailing period and comes with average risk grade and high return grade.

It is well diversified with 140-150 securities in its portfolio.

The equity part of the portfolio has invested in large-cap stocks following the growth style of investing. Securities having average sensitivity to the interest rate accounts for the debt portion of the portfolio. The fund is rated five stars.

2.HDFC Small Cap Fund

Objective

The fund aims to provide long-term capital appreciation by investing in small-cap companies.

Category

Equity: Small-cap

Snapshot

Why Invest in This Fund?

The fund has been one of the blockbuster funds of 2017 generating over 60% absolute returns during the calendar year.

However, owing to volatility in 2018, the performance has been moderate over the last one year period. Having said that, the fund continues to outperform its benchmark and category average over the three-years and five years period.

The fund comes with below average risk grade and above average return grade and is reasonably diversified with around 70-80 securities in the portfolio.

The portfolio manager scouts for small-cap companies that promise a growth outlook and are trading at a considerably discounted value when compared to its intrinsic value.

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The fund is a must add for one’s portfolio owing to marginally lower risk, as measured by standard deviation, when compared with category average and benchmark. The fund is rated five stars.

3.HDFC Dynamic PE Ratio Fund of Funds

Objective

The fund aims to offer capital appreciation by maintaining the asset allocation between equity and debt schemes of HDFC Mutual Fund.

Category

Hybrid: Multi Asset Allocation

Snapshot

Why Invest in This Fund?

The fund has beaten its benchmark over the three years and five year time period. It has managed to outperform its category average over the multi-trailing period and comes with high risk-grade and high return-grade. The fund is rated four stars.

4.HDFC Hybrid Equity Fund

Objective

The fund seeks to generate capital appreciation and income by investing in equity & equity related instruments. Also, debt instruments account for a small portion of the portfolio.

Category

Hybrid: Aggressive Hybrid

Snapshot

Why Invest in This Fund?

The fund has been one of the star performers of 2017 in the category and has generated over 28% returns, in absolute term, during the calendar year.

However, owing to volatility in 2018, the performance has been moderate over the last one year period. Having said that, the fund continues to outperform its benchmark and category average over the three-years and five years period.

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It comes with a below average risk grade and above average return grade and is reasonably diversified with around 60-70 securities in the portfolio. The fund is a must add for one’s portfolio to moderate the overall risk of the portfolio. The fund is rated four stars.

5.HDFC Mid-Cap Opportunities Fund

Objective

The fund seeks to offer long-term capital appreciation by investing in mid-cap companies.

Category

Equity: Mid-cap

Snapshot

Why Invest in This Fund?

The fund has performed exceptionally in 2017 generated over 40% absolute returns during the calendar year.

However, owing to the volatility in 2018, the performance has been moderate over the last one year period. Having said that, the fund continues to outperform its benchmark and category average over the three-years and five years period.

The fund comes with average risk grade and above average return grade. It is reasonably diversified with around 60-70 securities in the portfolio. The fund is rated four stars.

6. HDFC Short Term Debt Fund

Objective

The fund seeks to provide regular income by investing in debt securities and money market instruments.

Category

Debt: Short Duration

Snapshot

Why Invest in This Fund?

The fund has outperformed its benchmark and category average over the multi-trailing period.

The fund comes with a below average risk grade and average return grade. It is reasonably diversified with around 120-130 securities in the portfolio.

It is a must add for one’s portfolio to moderate the overall risk. The fund is rated five stars.

7. HDFC Top 100 Fund

Objective

The fund aims to offer long-term capital growth by investing in large-cap companies.

Category

Equity: Large-cap

Snapshot

Why Invest in This Fund?

The fund has performed exceptionally in 2017 generated over 33% absolute returns during the calendar year. However, owing to volatility in 2018, the performance has moderate over the last one year period.

Having said that, the fund continues to outperform its benchmark and category average over the last three and five years period.

The fund comes with high-risk grade and high return grade. It is reasonably diversified with around 45-50 securities in the portfolio. The fund is rated four stars.

Outlook

India remains significantly under-penetrated (11% of GDP vs. the global average of 62%) as far as the mutual fund industry is concerned.

The MF industry is likely to see a healthy growth rate over the medium term. A gradual shift from real savings to financial savings is already underway, and the same is expected to take center stage over the years to come.

Also, the proportion of financial savings in household savings has increased from ~40% four years ago to ~50% currently.
Within the financial savings also, the proportion of equity allocation has been on an increasing trend.

We believe HDFC AMC is well-positioned to grab the steady growth that the industry is set to witness.

Lastly, the strong brand and parentage of HDFC, efficiently run business, high shareholder focus, asset-light business model, healthy dividend payout ratio and high ROE shall keep the company’s valuation at a premium level.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww