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NFO analysis: HDFC Asset Allocator Fund of Funds

Henil Shah
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NFO analysis: HDFC Asset Allocator Fund of Funds

HDFC Mutual Fund launched HDFC Asset Allocator Fund of Funds (FoF) on April 16, 2021. This is an open-ended FoF scheme that seeks to invest in equity-oriented, debt-oriented & gold exchange-traded funds (ETF) while the funds’ asset allocation between the said asset classes would be dynamic in nature. The mix of equity, debt & gold would be decided, based on its in-house model that constitutes various valuation parameters such as price-to-equity (P/E) and price-to-book (P/B) ratios. 

HDFC Asset Allocator FoF is open for subscription up to April 30, 2021. It will again re-open within five business days of allotment of units under the new fund offer (NFO). 

Click here to access its scheme information document. 

 

Objective 

The objective of the scheme is to pursue capital appreciation by managing the asset allocation between equity-oriented, debt-oriented, and gold ETFs. Having said that, there is no assurance that the investment objective of the scheme will be realised or give guaranteed returns. 

 

Asset allocation 

Instruments

Indicative allocations
(per cent of net assets)

Risk Profile

Minimum

Maximum

High/Medium/Low

Equity Oriented Schemes

40

80

Low to High

Debt Oriented Schemes

10

50

Low to Medium

Gold ETF Schemes

10

30

Medium to High

 

The above asset allocation shows that at all times, it will not invest less than 40 per cent in equity and 10 per cent each in debt & gold. In fact, the SID of this fund also discloses the schemes that HDFC Asset Allocator FoF can invest in. 

Equity-oriented schemes: 

- HDFC Flexi Cap Fund 

- HDFC Top 100 Fund 

- HDFC Mid-Cap Opportunities Fund 

- HDFC Small Cap Fund 

- HDFC Growth Opportunities Fund 

- HDFC Capital Builder Value Fund 

- HDFC Focused 30 Fund 

- HDFC Dividend Yield Fund 

- HDFC Infrastructure Fund 

- HDFC Arbitrage Fund 

- HDFC Balanced Advantage Fund 

- HDFC Equity Savings Fund 

- HDFC Hybrid Equity Fund 

- HDFC Multi – Asset Fund 

- Equity ETFs/Index funds and/or other schemes of HDFC Mutual Fund or other domestic mutual funds having similar objectives, strategy, asset allocation, and other attributes. 

Debt-oriented schemes: 

- HDFC Liquid Fund 

- HDFC Overnight Fund 

- HDFC Ultra Short-Term Fund 

- HDFC Low Duration Fund 

- HDFC Money Market Fund 

- HDFC Short Term Debt Fund 

- HDFC Banking and PSU Debt Fund 

- HDFC Corporate Bond Fund 

- HDFC Credit Risk Debt Fund 

- HDFC Dynamic Debt Fund 

- HDFC Floating Rate Debt Fund 

- HDFC Gilt Fund 

- HDFC Income Fund 

- HDFC Medium Term Debt Fund 

- HDFC Hybrid Debt Fund 

- Other schemes of HDFC Mutual Fund or other domestic mutual funds having similar objectives, strategy, asset allocation, and other attributes. 

Gold ETF schemes: 

HDFC Gold ETF and other schemes of HDFC Mutual Fund, other domestic mutual funds have similar objectives, strategy, asset allocation, and other attributes. 

 

Benchmark 

The scheme is benchmarked against 90 per cent NIFTY 50 Hybrid Composite Debt 65:35 total returns index (TRI) and 10 per cent domestic prices of gold arrived, based on London Bullion Market Association's (LBMA) AM fixing price. 

 

Investment strategy 

The scheme will most likely allocate its assets between equity-oriented, debt-oriented and gold ETFs, based on prevailing market conditions. The fund manager will dynamically increase exposure to equity-oriented fund(s)/ETFs/index funds when market valuations are attractive and will tone down the equity exposure by increasing exposure in debt-oriented or gold ETFs, when equity markets get expensive or experience volatility or under any other conditions as the fund manager may deem fit. 

 

Fund manager 

This scheme will be co-managed by Amit Ganatra (Equity), Anil Bamboli (Debt) and Krishan Kumar Daga (Gold). Below are the details of each fund manager along with the performance of other respective funds managed or co-managed by them. 

Amit Ganatra 

Amit has collectively over 17 years of experience in equity research including around 9.5 years in fund management. He is working with HDFC Asset Management Company (AMC) since May 2020. 

Fund

Trailing Returns (per cent)

1-Year

3-Year

5-Year

HDFC Capital Builder Value Fund

63.50

5.22

11.67

HDFC Dynamic PE Ratio FoF

42.10

8.63

11.39

HDFC Multi-Asset Fund

42.50

9.60

9.69

HDFC TaxSaver Fund

52.06

3.96

9.97


 

Anil Bamboli 

Anil Bamboli collectively has over 25 years of experience in fund management, research, and fixed income dealing. He is working with HDFC AMC since July 2003. 

Fund

Trailing Returns (per cent)

1-Year

3-Year

5-Year

HDFC Banking and PSU Debt Fund

9.61

8.32

8.12

HDFC Dynamic Debt Fund

7.38

4.8

5.66

HDFC Dynamic PE Ratio FoF

42.1

8.63

11.39

HDFC Equity Savings Fund

26.65

6.85

9.85

HDFC Gilt Fund

7.33

7.34

7.23

HDFC Money Market Fund

5.94

7.02

6.92

HDFC Multi-Asset Fund

42.5

9.6

9.69

HDFC Overnight Fund

2.92

4.68

5.21

HDFC Short Term Debt Fund

10.03

8.58

8.19

HDFC Ultra Short-Term Fund

5.84

-

-

 

Krishan Kumar Daga 

Daga has collectively over 24 years of experience in fund management and research. He is working with HDFC AMC since September 2015. 

Fund

Trailing Returns (per cent)

1-Year

3-Year

5-Year

HDFC Arbitrage

3.46

4.86

5.31

HDFC Equity Savings Fund

26.65

6.85

9.85

HDFC Gold ETF

-0.53

13.41

8.51

HDFC Gold Fund

-5.74

13.39

8.73

HDFC Index Fund-NIFTY 50 Plan

62.03

12.3

13.97

HDFC Index Fund-Sensex

59.06

13.21

14.54

HDFC Multi-Asset Fund

42.5

9.6

9.69

HDFC Nifty 50 ETF

62.67

12.79

14.45

HDFC Sensex ETF

59.57

13.78

15.04

 

Our take on this

Investing in an asset allocator fund helps you to have a tactical asset allocation without the headache of doing it yourself. In fact, here, you have knowledgeable and experienced fund managers to take care of the allocations. However, don’t expect its cost to be low. Being a fund of funds, its expense ratio would be on the higher end unless it purely invests in ETFs. Having said that, the question is that whether it is worth paying a higher expense? In the beginning, over one, one and a half per cent expense ratio seems nothing. It gets noteworthy when the compounding starts playing a role as with your returns, the cost will also get compounded. Furthermore, this seems that it would be investing in its own equity, debt & gold funds. Although, they have mentioned that there's a possibility to invest in funds of other AMCs too. However, the probability of the same is quite less. Therefore, we believe that rather than rushing to buy it in an NFO, investors should wait until its portfolio gets ready. Once we have its portfolio, it would be quite easier to judge the performance of this fund.

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