Weekend Bytes
HDFC Flexi Cap Fund – 140x in 29 years*
In the realm of financial markets, longevity speaks volumes about stability and reliability. Recently, HDFC Flexi Cap Fund celebrated a significant milestone of 29 years – which is higher than the median age (28.4 years) of our country. The Fund is also one of the oldest Schemes in the Mutual Fund industry and has under its fold a strong AUM base of ~ Rs. 42,270 Cr as of 30th November 2023.
About the Fund
HDFC Flexi Cap Fund is an open-ended dynamic equity scheme investing across large cap, mid cap and small cap stocks. The Fund has the flexibility to tactically increase or decrease the allocation to various market cap segments based on outlook / valuations etc.
The Journey
The Funds strategy has always been to invest in stocks/sectors that are reasonably valued and to avoid paying an aggressive price for a stock, and this approach has often led to being invested in stocks/sectors ahead of the market cycles. This strategy generally has faced challenges during the initial phase of the cycle, however, once the market began to recognize the value of the underlying businesses, the value got priced in over a period of time and more than compensated for the under performance in the initial phase of the cycle.
Thus, by positioning the portfolio to broadly capture the beneficiaries of the next market cycle with adequate conviction to hold on to it during tough times, the fund has been able to generate significant alpha over the long term.
> Rs 1,00,000 invested on inception date i.e. 1st Jan’95 would have grown to ~Rs 1.4cr at CAGR of 18.63% as on 30th Nov 2023.
> A monthly SIP of Rs 10,000 in HDFC Flexi Cap Fund since its inception would have grown to Rs 15.34cr as on 30th Nov 2023.
Below table shows the rolling returns of the Fund for different time periods since its inception. Interestingly, over a 5-year horizon, investment in HDFC Flexi Cap Fund has always yielded positive returns. Further, in ~ 86% instances, returns exceeded 10% CAGR.
Current Portfolio Positioning
As of 30th Nov 2023, ~81% of the assets are invested in Large-Caps.
Key sectoral overweight for the Scheme are
> Healthcare: Stable domestic market, complex opportunities in US, relatively reasonable valuations
> Financials: Credit Growth, benign credit cycle, greater financialization of savings
> Utilities: Attractive valuations and defensive characteristics
Key sectoral underweight for the Scheme are
> Energy: Stock selection driven underweight
> Consumer Staples/Discretionary: Growth and margin risk, excessive valuations
> Materials: Global Slowdown
For portfolio details refer: hdfcfund,com
HDFC Flexi Cap Fund is well positioned in sectors with prospects of earnings recovery with reasonable valuations and is generally underweight in expensive sectors. In the current environment, investors can consider allocation to HDFC Flexi Cap Fund.
