The fund house has numerous issues to battle with. This month will complete two years since the current CEO took over. While changes have been made, a lot more needs to be done.
HSBC Mutual Fund has some serious demons to battle with.
The asset management company (AMC) has witnessed a dramatic fall in assets under management (AUM) over the past years. Known to make sporadic profits, it has been in the red over the past two years. And the performances of its schemes, specially its flagship offering HSBC Equity, leave much to be desired.
Ironically, the AMC had much going in its favour when it got itself into the asset management business. In fact, it would not be an exaggeration to state that HSBC AMC got off to a sizzling start. It launched in 2002 and the traction of the HSBC brand coupled with the outstanding performance of its flagship scheme put the AMC on the investment map. What was really interesting was the way in which HSBC Equity, while initially piggybacking on the brand, began to earn brand equity for the AMC. Investors noticed the numbers and flocked to the scheme and its AUM soared.
After HSBC Equity’s launch in December 2002, the AMC began rolling out equity products every year from 2004 onwards right till 2008, sometimes even two in a year. On the face of it, that could appear like pointless clutter but the products have been fairly well defined and thought out. In 2009, the India Advantage Fund was renamed HSBC Progressive Themes and its investment mandate underwent a change.
Unfortunately, the performances of the schemes have not been up to the mark. For instance, in the case of HSBC Midcap Equity, one really does not know what to expect. It put up a top quartile performance in 2012, which was preceded by a fourth quartile one in 2011. Despite it climbing the charts last year, on various trailing long-term performance rankings it currently languishes at the bottom quartile when compared with its peers.
Its flagship scheme HSBC Equity put up a great show in 2003 and 2004. After that, it began to stand out only in falling markets by displaying impressive downside protection capabilities. Though it’s a chart topper in the 10-year performance rankings, it does not stand out in other trailing long-term performance rankings.
Faltering performance is what has probably led to the fall in assets, which have been quite dramatic. Between December 2007 and December 2012, the dip has been 53%. However, CEO Puneet Chaddha is quick to point out that the decline is due to the AMC’s deliberate decision to move out of liquid funds. You can read his views here.
Coupled with the poor performance and falling AUM has been erratic profits. Over the past four years (2009 – 2012), the AMC has posted losses barring 2010. Prior to this period, it showed a profit in 2007 and 2008.
All eyes are on Chaddha to see if he manages to turn this AMC around. This month he completes a 2-year stint. While he has brought about changes in the investment process and a new recruit should be joining the equity team shortly, the change needs to be apparent in the scheme performance.
Going ahead, the AMC is looking at offering international products via the Fund of Funds (FoF) or feeder fund route. Its current international offerings – HSBC Emerging Markets and HSBC Brazil do add value to an Indian investor’s portfolio. What will go a long way is ensuring consistency of returns on its existing offerings.
The author is an Editor at FundsupermartNot sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.