HDFC Asset Management Company Ltd. (HDFC AMC) is one of India’s largest mutual fund companies and among the most profitable asset management companies (AMC) in the country. For the period from October 2023 to December 2023, the company had an average AUM of over Rs. 5.51 Lakh crores (excluding domestic fund of funds). Let us talk about the consumer product—HDFC Asset Allocator Fund.
About HDFC Asset Allocator Fund of Funds
HDFC Asset Allocator Fund of Funds is an open-ended fund of funds investing in equity-oriented, debt-oriented and gold ETF schemes through a systematic and process-driven asset allocation approach based on the financial model.
Investment Objective
The scheme aims to generate long-term capital appreciation/income by managing the asset allocation between equity-oriented, debt-oriented and gold ETF schemes.
Investment Process
The scheme seeks to allocate 40-80% of its assets to equity-oriented schemes, 10-50% to debt-oriented schemes and 10-30% to gold ETF.
- The scheme considers factors such as TTM P/E, 1 Year Forward P/E, TTM P/B and Earnings Yield while determining equity allocation.
- For debt allocation, the scheme aims to invest predominantly in schemes with exposure primarily to issuers with high credit quality.
Portfolio Composition
The fund holds 43.82% equity, 36.79% debt, 12.1%commodities, 0.73% real estate, and 6.56% in Cash and cash equivalents. The significant sectoral exposure is to Financials, which account for over 14.66% of the equity portfolio. The top five sectors hold more than 30% of the equity portfolio.
Source: Value Research
Top 5 Equity Holdings for Asset Allocator Fund
| Name | Weightage % |
| HDFC Flexi Cap | 17.01 |
| HDFC Top 100 | 16.61 |
| HDFC Small Cap | 4.24 |
| HDFC Mid-Cap Opportunity | 3.93 |
| HDFC Large and Mid Cap | 2.06 |
Source: Value Research
Top 5 Debt Holdings for Asset Allocator Fund
| Name | Weightage % |
| HDFC Short Term Debt | 15.18 |
| HDFC Gold ETF | 12.32 |
| HDFC Low Duration | 6.71 |
| HDFC Medium Term | 5.89 |
| HDFC Income Direct | 3.50 |
Source: Value Research
Past Performance
| Fund name | 1Y | Since Inception |
| HDFC Asset Allocator Fund (%) | 26.63 | 17.47 |
| Benchmark Returns (%) | 20.46 | 12.85 |
| Additional Benchmark Returns (%) | 28.40 | 16.97 |
Benchmark Composition – 90% NIFTY 50 Hybrid Composite Debt 65:35 TR Index + 10% Domestic Prices of Gold arrived at based on the London Bullion Market Association’s (LBMA) AM fixing price. Additional Benchmark Index – NIFTY 50 (Total Returns Index)
Fund Managers for HDFC Asset Allocator Fund of Funds
The following fund managers manage the HDFC Asset Allocator Fund of Funds.
- Mr Srinivasan Ramamurthy (Since 13th January 2022). He has a total of 12 years of experience in this field.
- Mr Anil Bamboli (Since 05th May 2021). He has a total of 28 years of experience in this field.
- Mr Bhagyesh Kagalkar (Since 02nd February 2022). He has a total of 28 years of experience in this field.
Why Invest in this Fund?
- Timing the market for various asset classes is difficult as different asset classes behave differently across different economic cycles.
- Combining negatively correlated/ less correlated asset classes – Strong case of diversification and mitigates volatility of portfolio returns
- Reduces dependency on a single asset class to generate returns
- Financial model-driven approach to asset allocation
Who Should Invest in HDFC Asset Allocator Fund?
Investors who are seeking
- Capital appreciation over long term
- Investment predominantly in equity-oriented, debt-oriented, and Gold ETF schemes.
Time Horizon
- One should look at investing for a minimum of three years or more.
- Investment through a Systematic Investment Plan (SIP) may help in tackling the volatility of the broader equity market.
Conclusion
The HDFC Asset Allocator Fund has been in existence for nearly three years. The fund allows exposure to different asset classes without worrying about identifying the individual mutual fund schemes. However, since it is a fund of funds, there is a double incidence of expenses charge. Investors who wish to have exposure to different asset classes for long-term capital appreciation can consider this fund.
Disclaimer: This is not recommendation advice. All information in this blog is for educational purposes only.
