Time to exit Hdfc Top 100?
Yesterday in a TV show a viewer asked me “I have been investing Rs. 1000 sip in Hdfc Top 100 is it time to get out of this fund”.
Actually this is a very difficult question to answer. It is like saying “Virat Kohli should be dropped because he scored a zero..or has had a string of 3 bad scores”.
It is a great fund with an awesome track record of 25 years. Is it resting on past glory? Well it has had top quartile performance every year…and at times top decile performance. That is not bad performance at all.
However, if you take the last 5 years performance it has surely under-performed the benchmark. No doubt about that.
Has the fund become too big?
Has PJ lost his Midas touch?
Both are difficult questions to answer. Size can be an issue in a small cap or even a mid cap fund, but not in a Top 100 fund. There is enough liquidity. It is always possible to choose a Hdfc bank over a Yes Bank and create alpha. I am sure PJ knows all that. Remember PJ is a good fund manager who has the guts to go against the grain of the market. However, when you see his portfolio, he too has a concentration of banks.
In 2017 and 2018 it had a rocking performance, but in 2018 it is not in the top quartile. Should that bother you? well, I am not so sure. In 2019 its performance put it in the second quartile. This is not too bad, but we have no clue what 2020 will unfold for this fund. Personally I have invested in Top 100 and may not come out of it in a hurry. I am happy buying CPSE for my Psu portfolio especially because it is so beaten down now. However, it goes against my grain of investing in PSU.
I do think that investing in Hdfc Equity fund is better – because the same fund manager – has more leeway in terms of investing.
I have other issues with a large cap fund. Just too much money is going to the large cap stocks. All the money of EPFO, NPS, Index funds, many ETF are all chasing the same shares. This is not too great for the investor. So I would feel that a bubble is being created in the large cap stocks, but then I am not a good fund manager, and I can change my mind on Monday morning.
I do not like the costs of Hdfc Top 100. Surely a share that is not beating the market indices is not a great place to be in. Or is it?
It is time that the large cap funds aligned themselves with the index fund costs / etf costs. Yes time has come for fund houses to either perform or perish. Sheer inertia will stop a few people from coming out of funds like this and going to ETF…other than such people most money will move to ETF…
Dilip
Sir, what’s your take on FI Blue chip fund
Abhay
SEBI should take appropriate measures to make expense ratio as per fund performance, why should investors still pay high expenses for a poorly managed fund?
aks10
Sir, what to interpret from this statement of yours “All the money of EPFO, NPS, Index funds, many ETF are all chasing the same shares” ?? Shall I “the smallest fish in ocean” stop investing completely OR invest 80%/50%20% of my total portfolio into Large cap?
Sanjeev Nanda
Awesome Virat Kohli analogy at the beginning. And you are most certainly correct in pointing out the misplaced trust SIP’s like HDFC have garnered overtime (especially in the last few years). Honestly, if you’ve been investing for less than 5 years, cut your losses and get out. But if you’ve been involved for more time, there is incentive (albeit minuscule) in sticking around. HDFC 100 does suffer from its bloated investments into large cap markets, more importantly because recent trends have showed how volatile LC’s themselves can be. Wait till there is even a sliver of growth. Then sell IMMEDIATELY!
HDFC 100 is a highly risky investment in my opinion.