Puneet Chaddha, Chief Executive Officer, HSBC Mutual Fund talks to Cafemutual about their new scheme Managed Solutions Fund, expansion plans and more.
How has FY2013-14 been for HSBC Mutual Fund?
The last two years have been a game changer for us. We have re-launched our institutional business. Our AUM has increased 46% in the last quarter while the industry’s assets grew by 11%. We are one of the largest managers of Indian equities and fixed incomes $16.78 billion as on 31st December 2013. (It includes off-shore sub advisors, Domestic assets and PMS)
How do you plan to grow your AUM?
We have been very conscious in launching new funds. We have the least number of (20) products in the industry. The industry on an average has 45-50 schemes. We have done away setting of any AUM targets. Targets tend to promote product push. We are optimistic that we will grow to a reasonable size.
Have you seen churning after doing away with exit loads?
No we haven’t seen such behavior from investors. If the funds are sold appropriately then there is no issue of churning.
Are you planning to expand your product portfolio?
We had launched HSBC Asia Pacific (Ex Japan) Dividend Yield Fund in February. We may launch one more overseas fund of funds soon.
You are launching Managed Solutions Fund. Is there an appetite for asset allocation funds among investors? How do you see this category growing in the near future?
Globally, we have seen that there is a great demand for asset allocation funds. Asset allocation funds tend to protect downside, have lower volatility and provide superior risk adjusted return to investors. We are getting encouraging feedback from distributors and investors on this product. I believe in India too this category will grow significantly.
The fund provides three options based on the risk-profile of investors – conservative, moderate and aggressive. It’s a fund of funds and we will invest in our own funds. Since we don’t have a Gold ETF we will invest in a third party Gold ETF. The fund will be managed dynamically.
What is the expense ratio of this fund?
The expense ratio of aggressive plan will be 2.31%, 2.20% for moderate plan, and 1.65% for conservative plan.
SEBI has asked AMCs to increase skin in the game by putting in seed capital in their schemes. What are your views on this? Will it help bring down casual fund launches?
It is a step in the right direction. We will comply with all local regulations of SEBI. Fund houses were launching lot of funds in 2000s when there was entry load. It is no more the case now. Now, funds are launched with a lot of due diligence. Even SEBI has been very strict in giving approval for new funds.
Many AMCs have launched closed end equity funds. Are you also planning to launch a closed end fund?
I’m not a great fan of closed end funds. I think exit barrier tend to become entry barrier for investors. Mutual funds have to provide returns as well as liquidity to investors. We don’t intend to launch any closed end funds.
How do you plan to expand your reach beyond top 15 cities?
We are already present in 29 cities including many B-15 cities. Our reach will grow as and when our branch network grows. We are also expanding our reach through other channels. It is not feasible for us to set up our own branch in small cities.
