As of 31‐Jul‐2021, HDFC Multi‐Asset Fund (“the Scheme”) has delivered 1 year return of 29.38% vs 25.02% for its Benchmark (90% NIFTY 50 Hybrid Composite Debt 65:35 Index + 10% Domestic Price of Gold. ## NIFTY 50 (Total Returns Index).
Each asset class behaves differently across different economic cycles. Out of 23 fiscal years since FY99, Equity has been the best performing asset class in 12 years, while Debt and Gold have been best performing asset class in 5 and 6 years respectively.
Data used for asset classes: Equity ‐NIFTY50, Debt‐NIFTY 10 year benchmark G Sec, Gold‐Spot Rate INR/10 Gms Source: Bloomberg, MFI Explorer, World Gold Council
As asset class winners keep changing, asset allocation is critical for wealth creation. HDFC Multi‐Asset Fund, which invests in 3 asset classes viz. Equity, Debt and Gold, aims to meet asset allocation needs of investors. Equity aims to provide capital appreciation, Debt aims to provide stability to the portfolio and Gold is a potential safe haven asset class, which also provides hedge against inflation and currency depreciation.
The Scheme adopts a model driven approach for asset allocation.
· The model indicates percentage of unhedged equity allocation by considering 4 valuation driven factors. Unhedged Equity allocation range indicated by the model is between 40% ‐ 80%. If markets are expensive as compared to history, model will indicate lower unhedged equity allocation and vice versa.
· As of July 31, 2021, portfolio had unhedged equity exposure of ~53.8% of Total Assets. Further, hedged equity exposure was ~11.7% of Total Assets. The total equity exposure (both hedged and unhedged) is maintained above 65% so as to retain the equity taxation benefit.
The Scheme invests between 10% to 30% of total assets in Debt instruments & 10% to 30% of Total Assets in Gold related instruments. As of July 31, 2021, Exposure to Gold ETF and Debt (including cash/cash equivalents and Net Current Assets) was ~10% and ~21% of Total Assets respectively.
The Scheme currently has a large cap bias, with 70% of its unhedged equity assets being invested in Large Caps as of July 31, 2021.
In terms of sector allocation, the Scheme has overweight position in Consumer Discretionary, Consumer Staples and Industrials; and underweight position in Financials and Energy.
Mr. Amit Ganatra, Senior Fund Manager of HDFC Asset Management Company Limited (HDFC AMC) said, “Global as well as domestic growth prospects have been buoyed by accommodative monetary and fiscal policies, pent up demand recovery, vaccination drive and turnaround in corporate profitability. In India – corporate earnings cycle has turned around post Covid‐19 and a strong earnings cycle creates opportunities for investors to participate in equity as an asset class. However, there are also uncertainties around possible 3rd Covid‐19 wave, sustainability of recovery, potentially higher inflation and higher valuations post strong market rally. In this kind of an environment, Investors should consider asset allocation strategies as they not only ensure equity participation, but also aim to protect downside by exposure to other asset classes namely debt and gold.