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Equity markets are at all time high and many MFDs are finding it difficult to deploy lumpsum money of their clients. What is your suggestion to them?
Indian economy has shown strong growth momentum over the past few years with incremental government reforms. Indian government has carried out multiple reforms with focus on strong infrastructure development and push to increase manufacturing in India. Indian markets have attracted incremental investments from FII and domestic institutional investors due to strong earnings growth over a longer term in the past few years. Looking ahead into 2024, we expect the growth momentum to continue.
We believe the positive trend in equity markets will continue although intermittent volatility cannot be ruled out. The Indian growth story remains compelling, offering investors the potential for wealth creation over the years. Optimum asset allocation across major asset classes is the key to generate wealth over a long term.
HSBC MF has launched HSBC Multi Asset Allocation Fund with its NFO from Feb 8- Feb 22, 2024. What’s the rationale for launching this scheme?
In our view, the global macro environment remains challenging with heightened geo-political and economic uncertainties. However, with inflation now under control, the US Fed has indicated the potential for interest rate cuts going forward which can be favourable from debt market perspective.
For India, growth has continued to remain strong with GDP growth of 7.6% in Q2 FY24 driven by strong government spending and pickup in investments, manufacturing and construction. The 2024 interim budget has re-affirmed government focus on infrastructure. At the same time reduction in fiscal deficit should also help in easing of domestic rates. This background can make both equities and debt attractive over the long term.
Considering the global geopolitical scenario, negative events can impact markets in the short to medium term. Investments in asset classes such as Gold/Silver ETFs can help counter volatility in such events.
So current environment can be conducive for these major asset classes viz., equity, debt and gold/silver ETFs. HSBC Multi Asset Allocation Fund aims to invest in these asset classes to take advantage of current favourable market scenario.
MFDs can do asset allocation for their clients through existing set of funds. Why should they look at multi asset allocation funds?
Outlook for debt seems positive with the interest rate cycle turning globally. At the same, investing in Indian equities in the coming decade could result in wealth creation for investors in long run due to investment in infrastructure, private capex cycle picking up, demographics dividend, rising aspirational class and rapid increase expected in per capita incomes going ahead. Higher valuations can lead to higher volatility, hence investing through multi-asset funds can seem like favourable option especially in these times of geopolitical uncertainty which can also makes investment in asset classes like gold/silver attractive over longer duration.
Where do multi asset allocation funds fit into client’s portfolio?
Positive outlook for Indian companies across market caps makes case for long term equity investing. One may consider multi asset allocation funds to reduce volatility in the long term. Investors who wish to invest in equities for long term growth while aiming to reduce volatility during negative events through debt and gold/silver ETFs may consider multi asset allocation funds.
Multi asset allocation funds have been in the news due to indexation benefits. What will be taxation incidence of HSBC Multi Asset Allocation Fund?
HSBC Multi Asset Allocation Fund aims to invest 65% to 80% in equities & equity related instruments and 10% - 25% each in debt & money market securities and gold/silver ETFs. The fund will benefit from the equity fund taxation.
How is your fund different from other multi asset allocation funds and why should MFDs consider it?
Globally, HSBC Asset Management India has substantial amount of AUM being managed under Multi Asset Allocation Strategy, which gives HSBC the platform advantage.
In the HSBC Multi Asset Allocation Fund, the allocation of equity, debt, gold/silver ETFs is carefully determined to create a well-balanced portfolio. The portfolio construct and strategy would be as follows:
Equities & Equity related instruments: 65% to 80% allocation
- Actively managed portfolio of companies across market caps. The fund will invest in large caps for stability and have allocation to mid and small caps and aim for growth and alpha generation over longer duration.
- Asset re-allocation could be undertaken basis changes in a market / asset class outlook of the Fund House
Debt & Money Market Securities- 10% to 25%
- Aims to invest in high quality assets including GOI securities, corporate bonds, money market instruments to generate alpha with active duration management
- Aims to build a liquid portfolio to enable positioning changes based on evolving scenario
- Focus on the short to medium end of the curve
Gold/Silver ETFs – 10% to 25%
- Gold/Silver ETFs allocation is expected to be around 10% to 25%
- Aim to compensate volatility when situation arises and support growth over a long term through Gold/Silver
Arbitrage
- In certain market situations or if market outlook is negative, equity portion can be used for arbitrage with an aim to lower a downside impact
- In case of extreme events, arbitrage can help reduce volatility and improve overall performance. This comprehensive allocation approach offers investors a well-diversified and balanced investment opportunity.
