Analyst Review: HDFC Flexi Cap

Apr 27, 2023

HDFC Flexi Cap Fund was managed by Prashant Jain for over two decades. When he resigned from the fund house in July last year, investors were concerned.

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Our take on the current fund manager.

Fund manager Roshi Jain has years of experience under her belt. She started off as an analyst at Franklin Templeton Mutual Fund and was there for 16 years, before joining HDFC Mutual Fund at the end of 2021.

The change of guard here hasn’t meaningfully impacted the investment strategy or the style with which this fund is managed. This is largely because Roshi’s investment style and thought process is similar to Prashant’s in many ways.

  • Valuation conscious
  • Top-down as well as a Bottom-up approach
  • Buy-and-Hold
  • Invests in PSUs
  • Does not hesitate to take high-conviction bets
  • Does not mind withstanding underperformance if their style is out of favour
  • Benchmark aware but not benchmark hugging

This will help in maintaining the continuity in the investment strategy and nature of the portfolio.

Given Roshi’s experience and execution capability, we believe that the fund will be able to navigate through the challenging times and deliver noteworthy performance going ahead. Hence we assign Silver (Direct Plan) and Bronze (Regular Plan) ratings.

What the Morningstar Fund Rating indicates

How she constructs the portfolio.

The strategy continues to be growth at reasonable price (GARP). Roshi looks for sectors, and stocks within those sectors, which offer high growth at reasonable valuation. The objective is to invest in sectors and companies, which have a more structural growth theme and growth visibility over medium to long-term.

The portfolio is currently positioned to benefit from the pick-up in India’s capex and infrastructure story. It is overweight manufacturing since this would revive private capex and lead to banking sector growth. In the consumer durable segment, it is overweight the auto sector which can see higher growth as the consumption increases. Given the uncertainty on the global front, the portfolio is underweight commodities, metals and energy. While the manager has a Neutral view on IT sector, she is building exposure in the healthcare space.

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How the fund has performed.

The fund had built a noteworthy track record under its erstwhile manager Prashant Jain. Under his tenure, as well as over a 10-year period, it has outperformed the category peers and benchmark index.

However, over the last few years, the fund witnessed a rather volatile performance pattern. After hitting a rough patch in 2019 and 2020, it made a strong comeback in 2021, with Prashant’s valuation conscious investment approach and his investment style back in favour. It continued with its good run in 2022 as well.

The fund has performed well under Roshi’s short stint this far. Given the fund’s portfolio construct, it can witness underperformance if there is a disruption in India’s capex and infrastructure recovery, as the portfolio has high exposure to the banking, manufacturing and real estate segments.

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