September 16, 2025
admin
HDFC Mutual Fund has launched the HDFC Diversified Equity All Cap Active FoF and we at SahiFund.com had the opportunity to interact with Mr. Srinivasan Ramamurthy, Senior Fund Manager – Equities, HDFC AMC LTD. on wide ranging topics related to the NFO.
1. Selection Universe & Edge versus a Simple Index
Will the FOF invest only in HDFC MF’s own schemes or also consider external AMCs?
The SID also allows for investment into equity-oriented schemes of other Domestic Mutual Fund houses. However, given the diversity and pedigree of offerings within the HDFC Mutual fund ambit, the FOF currently plans to invest in in-house schemes.
What is the repeatable “edge” in picking underlying funds in HDFC Diversified Equity All Cap Active FOF versus holding a NIFTY 500 TRI index fund?
The Scheme aims to use a framework driven approach to allocate across different market caps, with an objective to provide better risk-adjusted returns. The framework relies on input variables identified across market valuations, liquidity, sentiments, and macro. The framework deploys a valuation sensitive counter-cyclical approach with monthly (or more frequent if needed) re-balancing. Further, the choice of schemes will be made on the basis of the determined market capitalization allocations and ensuring diversity across fund manager styles. This should help achieve the end objective of providing investors with a smoother wealth creation journey.
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Portfolio Construction across Market Caps
What are your target bands for large/mid/small caps through the cycle?
The allocations across market capitalizations are derived by back testing the risk adjusted return outcomes for different values of input variables. The outer limits for allocations are determined in compliance with our internal risk controls.
What hard guardrails will you use when small-cap valuations run hot but flows chase momentum?
Counter-cyclicality as a mindset ensures that the framework is not momentum chasing and would look to reduce risk particularly when sentiments excesses are observed.
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Rebalancing, Risk Controls & Drawdown Playbook
What are the precise triggers for adding/trimming an underlying fund (underperformance window, PM change, style drift, AUM surge, liquidity)?
The choice and allocations to funds are predominantly a consequence of market capitalization allocations determined by the framework and the desire to have fund manager style diversification.
In a 15–20% market drawdown, what’s the stepwise playbook—SIP ramp-up, STP, factor tilts, cash/defensives?
The FOF would not look to take cash calls and sharp market drawdowns might provide opportunities in terms of meaningful re-allocations across market capitalizations as per outlined framework.
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Costs, Overlap & Capacity
What’s the all-in TER range at the FOF level and how do you cap the “double expense” from underlying funds?
The TER of the FOF are capped in accordance with the SEBI regulatory limits, which should allay any fears around “double expense”.
How do you monitor stock overlap across underlying schemes and avoid unintended concentration?
HDFC AMC has an experienced team of Risk Management Professionals, who provide the Investment Team with the overlap of the Funds on regular basis. These inputs would be considered by the Fund Manager to determine the appropriate allocation to underlying funds, thereby achieving effective diversification.
Any capacity alerts (AUM limits) that would force style dilution?
We do not foresee capacity as a constraint which could force style dilution.
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Benchmarking, success metrics & investor use-case
Why NIFTY 500 TRI for an active FOF—what excess return/volatility targets are you committing to over rolling 3–5 years?
Since the FOF will invest in underlying schemes based on varied market caps, NIFTY 500 TRI should be a representative benchmark. The fund does not commit to any excess return / volatility target.
How will you measure and report “alpha attribution” (allocation vs selection vs timing)?
The performance of the Fund versus its Benchmark along with other standard disclosures would be reported in the Factsheet. Internally, as the case with all products, the Risk Management and Investment Teams would continue to run a more detailed attribution models for assessing performance and effecting framework improvements.
For investors with very high risk and 5+ year horizons, what deployment plan do you recommend—lump sum vs SIP/STP—during the NFO and first 6 months?
Both investment paths – lumpsum or SIP/STP could be considered by investors. Since this product is meant for investors looking to create wealth over the long-term, in our view, SIP would be preferred as it could help tide through short-term volatility, leading to better investor behavior.
Interview by Ms. Jainee Shah
Director
Chanakya Mediahouse Pvt. Ltd.
SEBI Registered Research Analyst
The views expressed by Mr. Srinivasan Ramamurthy- Senior Fund Manager- Equities are as of 16th Sept 2025. The views are based on internal data, publicly available information and other sources believed to be reliable. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The Fund/ HDFCAMC is not guaranteeing any returns on investments made in the Scheme(s). Past performance may or may not be sustained in future and is not a guarantee of any future returns. HDFC Asset Management Company Limited (“HDFC AMC”) does not warrant the completeness or accuracy of the information herein. Neither HDFC AMC, nor any person connected with it, accepts any liability arising from the use of this material. The recipient(s) should before taking any decision, should make their own investigation and seek appropriate professional advice.
