Choosing to Diversify within Equity through an FOF

Why choose a Diversified Equity All Cap Active FOF?

Shift thinking from “Annual” to “Decadal”

In the short-term, various news and events tend to impact different market cap segments in different manners. As we can see from the table below, category underperformance can get prolonged for an extended period of time, which can lead to various behavioural errors. Conversely, if we increase our investment horizon, there is a tendency of convergence of returns.

Table: Divergence in Annual Returns, but Convergence in Decadal Returns

Source: Bloomberg. Large Cap = NIFTY 100 TRI; Mid Cap = NIFTY Midcap 150 TRI, Small Cap = NIFTY Smallcap 250 TRI. For FY06, starting point is April 01, 2005 instead of the previous year end, as NIFTY Midcap 150 TRI and NIFTY Smallcap 250 TRI values start from April 01, 2005 onwards. Past performance may / may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC is not indicating or guaranteeing returns on any investments.

By choosing an Diversified Equity All Cap Active FOF, an investor can aim to reduce the behavioural errors induced by short-term investment approach and adopt a more long-term approach to investing.

Effective “Rebalancing” of your Portfolio

A Case Study: Correction in Mid and Small Caps in CY18-20 could have driven lower exposure to those segments of a "Buy and Hold" investor's portfolio

Source: MFI Explorer, Bloomberg. Large Cap = NIFTY 100 TRI; Mid Cap = NIFTY Midcap 150 TRI, Small Cap = NIFTY Smallcap 250 TRI. *SMID: Small and Mid Cap. Past performance may / may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC is not indicating or guaranteeing returns on any investments.

Result of such an Approach: Such a “Buy and Hold” portfolio was under-exposed to the upside in the recovery, when Small and Mid Caps outperformed Large Caps

Thus, a Diversified Equity All Cap Active FOF can use a framework-based approach to rebalance market cap allocation to manage your investments better

What is HDFC AMC’s Solution?

HDFC Diversified Equity All Cap Active FOF: This Fund aims to invest in units of Domestic Equity-oriented schemes based on varied market caps. By doing so, it aims to provide an investor with an easy and convenient way to get all-round equity exposure via multiple market caps, Fund Managers and investment styles all in one solution.

Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Funds scheme makes investment (subject to regulatory limits).

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.