A fund with a cause

Investors in HDFC Charity Fund for Cancer Cure have donated Rs. 60 crore to Indian Cancer Society (ICS) so far.
By Morningstar Analysts |  10-03-17 | 

HDFC Mutual Fund is coming up with the third installment of its HDFC Charity Fund for Cancer Cure which aims to help cancer patients.

Being a closed end fund, your investment is locked in for three years and the dividends declared by the fund during this period go to Indian Cancer Society (ICS) which is a non-profit organization founded by Dr. D.J. Jussawalla and Mr. Naval Tata. The advisory council for ICS identifies patients who genuinely need financial aid. Generally, it provides help to families whose family income is less than Rs. 2 lakh per annum. The organization has tied up with 16 hospitals across 28 states where patients can undergo treatment. It has sanctioned a maximum of Rs. 4 lakh per patient which it says covers a significant cost of the treatment.

Investors can choose to donate either 50% (by default) or 100% of the dividends declared by the fund at the time of investing. Investors looking to save some tax have the option to invest in this fund as the donations of income to ICS is eligible for deduction under section 80 G of Income Tax Act, 1961.

The first fund which was launched in 2011 to commemorate the completion of ten years of HDFC Mutual Fund has benefited over 3,000 underprivileged cancer patients. The maiden fund collected Rs. 77 crore and paid out Rs. 13 crore in dividends to Indian Cancer Society (ICS). The second fund launched in 2014, which is due to mature in March, met with a reasonably good response by collecting Rs. 175 crore and donated Rs. 22 crore to ICS.

The fund house is not earning any revenue from this fund. Except for the statutory levy which is capped at 3 basis point (which includes 2 basis point for IAP), the fund house has not been charging any investment management fee for this fund. Moreover, this time, the AMC will contribute an amount equivalent of the charity paid through dividends to ICS. The AMC had donated a total of Rs. 25 crore through the last two series to ICS.

The rising number of cancer cases in India calls for larger contribution from the society which the fund house is hoping to achieve through this fund. Cancer is impacting all age groups, especially children and youngsters. Almost half (42%) of the beneficiaries of HDFC Charity Fund have been children up to 18 years of age. Another 35% of beneficiaries have been patients between 18 and 30 years of age.

Mumbai based adviser Hemant Rustagi of Wiseinvest Advisors who has recommended this fund to his clients says, “So far, people who have been looking for avenues to donate were skeptical of the ultimate beneficiaries of their money. Since HDFC Charity Fund comes from a company of repute and the donation is being given to an organization which also gets support from Ratan Tata Trust, investors get some comfort that their money will be in the right hands.”

Distributors say that there is growing interest for this cause among investors in India. “We have been actively recommending this fund to investors and they have been very forthcoming. Even I have invested in this fund in my personal capacity,” says Brijesh Dalmia of Dalmia Advisory Services.

Globally, high net worth individuals have been using the impact investing route to contribute to society with the aim of making a return. Global Impact Investing Network (GIIN) estimates that about 403 funds manage $77 billion in impact assets as on May 2016.

However, HDFC’s fund is not exactly an ‘impact investment’ as it is generating a return by investing in all types of companies and operates more like a charity fund. On the other hand, impact funds specifically invest in firms operating in sectors such as education, agribusiness, healthcare and clean energy. One such example is Swiss based UBS oncology impact fund which invests in companies involved in early stage oncology treatments.

HDFC Charity Fund for Cancer Cure opens for subscription on March 10 and closes on March 24. This time, the fund offers two plans – debt and arbitrage. The arbitrage plan increases the dividend corpus by saving on dividend distribution tax because it gets equity tax status.

At Morningstar, we believe investors who feel strongly for this cause can look at investing in HDFC Charity Fund.

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