HDFC Asset Management Company (AMC) is banking on new product launches to arrest the slide in its market share.
The country’s second biggest fund house in terms of assets under management (AUM) has launched four equity funds in the past few months to plug gaps in its product basket. To put the number in context, the asset manager launched only five actively-managed equity schemes between 2001 and 2020.
Market observers say HDFC AMC is tweaking its style under the new leadership of Navneet Munot with an eye on both short as well as long-term benefits. Munot, who took over from Milind Barve after his 12-year reign, in February. The former chief investment officer (CIO) of SBI AMC, the country’s largest fund house, joined at a time when the company was ceding market share. HDFC AMC, which commands premium valuations in the listed space, has seen its AUM market share drop nearly 200 basis points for the one-year period ending June 2020.
Shares of HDFC AMC have underperformed the market as analysts have cut back their earnings growth forecasts. In the past one year, the stock has gained 26 per cent compared to 48 per cent gain on the Sensex. So far this year, the stock is up just 4 per cent even as the Sensex has gained 21 per cent. Listed peers UTI AMC has seen its stock more than double this year, while Nippon India AMC has gained 36 per cent.
Experts say the key challenges before Munot are to increase the market share, get new investors into its fold and shrug off the negative image caused by underperformance of its key schemes.
Experts say HDFC AMC’s equity fund performance has started to improve, which would help the asset manager attract flows in the next few months.
Kaustubh Belapurkar, Director–Manager Research, Morningstar India, says “in terms of the performance, we all know that Prashant Jain (CIO and executive director) has been largely a value investor. This investment style was out of favour till last year and although funds were well managed. Just that the market cycle was not conducive for his style, resulting in funds underperformance. “
“Funds managed by Prashant Jain did very well between 2014 and 2016. The funds had a tough time between 2018 and August 2020 as growth stocks were in demand. The performance of few of HDFC AMC’s flagship funds underperformed relative to the benchmark indices and peer group. But since late 2020 the value theme came back in favor,” he adds
Data from Morningstar shows that HDFC Top 100 fund managed by Prashant Jain saw significant underperformance in the years between 2018 and 2020. But in the last one year the returns have fallen in line with the market, with returns of 48.4 per cent compared to category average of 50.5 per cent, shows the data from Value Research.
Despite witnessing ups and downs of the equity market, HDFC Top 100 Fund has managed to give returns of 19.3 per cent since its launch in October 1996.
“There has been a significant improvement in the performance. Some of the funds are in top quartile or in top decile in the last one-year performance. Even the performance over three and five years has started looking good and being recognised by our distribution partners as well as clients. We have been making efforts on all counts including better connectivity with our partners to spread this message,” Munot observed during the earnings call for the June 2021 quarter.
Market players say improvement in existing scheme performance and launch of new schemes will help HDFC AMC get back lost ground. The fund house has launched new schemes in categories such as thematic funds, passive products and international funds.
During the earnings conference, Navneet Munot had stated that “Some of these categories our product bouquet was not full, but over the last couple of quarters we have launched a few products. We are going to have some more products over the next several quarters.”
The fund house has launched products such as HDFC Dividend Yield Fund, HDFC Asset Allocator FoF, HDFC Banking & Financial Services Fund and HDFC Nifty50 Equity Weight Fund.
“And we believe that all of these efforts, including the performance improvement would be noticed by the market and we should be able to see gradual improvement in the market share,” Munot has said during the earnings conference call.
The fund house has also increased outreach to small and medium distributors to further improve the presence.