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HSBC MF has witnessed healthy growth over the last one year. What are the three things that have contributed to this?
2022 was an integration year for HSBC and L&T and in the following year, people saw the integration moving quite smoothly especially on the investment side. With things falling in place within the organization, people now wanted to work with integrated HSBC. So, a lot of people came on board from banks, national distributors on the organized side and individual MFDs joined which grew our momentum.
Secondly, we launched four products this year - two were in equity space and the other two were on the fixed income side; these products added to our growth.
Lastly, the SIP book grew as confidence in the organization increased and people started getting onboard and consequently, the SIP book increased.
ELSS is by far one of the best tax savings options for investors. However, many Indians are yet to invest in ELSS. How can the industry make ELSS popular among people?
ELSS is probably the best product in all aspects - it has the shortest lock in period, gives benefit from tax return perspective and helps create enormous wealth in the long term. Inspite of all these merits, very few customers opt for this in comparison to its competitive products.
The challenges in ELSS comes from it being a market linked product with no guarantee of returns. Notably, in India there is an affinity to lean towards assured returns instead of market linked returns. There is a need to work on this aspect and assure people that they will get the desired returns in the long term from equity-related products.
Secondly, a couple of competing industries are positioning the tax saving product also as retirement product. Positioning ELSS similarly can further improve their popularity.
Lastly, another way to increase penetration is if we can replicate an SIP equivalent for ELSS. Just as you build your wealth through SIPs, you can also build your investment alongside tax benefit in ELSS.
One of the most common beliefs among investors is that ELSS is just for tax saving and hence, they usually invest only up to Rs.1.50 lakh in these funds. How can MFDs persuade their clients to invest more?
If we are to build a proposition around ELSS as an industry, we need to position the product as not just a tax saving instrument but a retirement instrument where one should be invested for a longer period of time. I think this itself will move the perception about ELSS. A combination of these two factors will help in increasing the ticket size.
For MFDs, ELSS is like another equity product, where a long-term investment which is 36 months in this case, is bound to show better returns and it can help the fund manager to outperform the benchmark. Also, the longer period ensures that volatility is handled, predictability of returns becomes higher, if we can position
ELSS as a long-term investment product, then we can increase the ticket size easily.
Most ELSS funds have also shown given returns in line with diversified equity funds or marginally better in some cases, which can also be a good incentive.
How can MFDs make narrative around ELSS simpler for clients?
I don’t think ELSS is a category separate from mutual funds. The only way we can make it simple for investors is by calling it another mutual fund product with added tax benefit in it. It is not advised to compare it with any alternative product and try to argue one against the other as both will have different merits and this will only make things tougher.
Apart from educating clients, what are the two things that MFDs can do to sell ELSS more effectively to clients?
The MFDs who are working with multiple products can use ELSS as a means of diversifying their tax instruments which will ensure that you get the benefits of multiple asset classes and the style of managing, so there can be assured return products, insurance and ELSS products in your kitty.
For people only doing mutual funds, it is the best to start off with talking about ‘why mutual funds?’ and how ELSS fits as a good product, instead of making it a standalone product.
How do you position HSBC Tax Saver Fund in the market as against other ELSS funds? What gives it a competitive edge?
We are a bottom-up fund house which is agnostic to benchmark. We are not benchmark hugging fund house but we definitely are benchmark aware. For us, it’s more about stock selection which is our forte. This gives us an advantage for ELSS as it invests in flexicap style which gives us the liberty to choose across market caps. Also, ELSS is a lock- in product which gives it the flexibility to execute ideas which might be in the early stage of recovery or growth trajectory.
The way we manage money is away from benchmark and this helps us to play both sides of coin. But this also makes it a bit risky, so we mitigate it by investing in higher number of stocks. So, we keep 60-70 stocks range and diversify the portfolio.
