HDFC Mutual Fund changes structure of key schemesHDFC AMC (Asset Management Company) has notified changes to several HDFC schemes to comply with SEBI classification rules. We take you through them below.

HDFC Top 200 Fund (becomes HDFC Top 100)

SEBI Category assigned: Large-cap

This long-standing fund was launched in 1996 and has given roughly 20% annualized returns since then. You can read more about it here.

HDFC Top 200 has been classified as a large-cap fund which means it can only invest in the top 100 companies by market capitalization. In other words, top 200 has become top 100 and it is going to be a lot more ‘large cap’ than it used to be. Its benchmark has also changed from S&P BSE 200 to Nifty 100.

The fund could previously allocate up to a 100% of its corpus to equity, with the flexibility to invest the remaining in debt as well. This has been changed to 65-100% in equity and 0-35% in debt.

HDFC Children’s Gift Fund

SEBI Category assigned: Children’s Fund

This scheme previously had a lock-in of three years or until the child attains the age of majority (18), whichever is earlier. Under the new rules, it will have a lock-in of five years or until the child attains majority (18 years), whichever is earlier. The lock-in period will remain three years for those who invest before 23rd May 2018.

The fund could earlier invest 40-75% of its assets in equity and 25-60% in debt. This has now been changed to 65-80% in equity, 20-35% in debt.

In other words, the fund has been made more equity-oriented than it used to be. However, no drastic change will follow. The fund currently has 67.85% of its assets in equity, above the new minimum threshold.

HDFC Large Cap Fund (becomes HDFC Growth Opportunities Fund)

SEBI Category assigned: Large and midcap

The fund will be allowed to invest 35-65% of its assets in large-cap companies and mid-cap companies respectively. It can invest 0-30% of its assets in small-cap companies. Such detailed rules were not earlier in place.

The fund could earlier invest 80-100% of its assets in equities (with no mention of market cap) and the rest in debt.

The scheme’s benchmark has also shifted from the Nifty 50 Index to the Nifty Large Midcap 250 Index.

HDFC Midcap Opportunities Fund

SEBI Category assigned: Mid-cap fund

The fund could earlier go from 75-100% into the stocks of mid and small caps of which 0-15% could be small caps. It could place the balance assets in other companies (such as large caps) or in debt.

The new rules define precisely what mid-cap stocks are. These are companies ranging from the 101st largest to the 250th largest company by market capitalization. Under the new rules, the scheme must place 65% of its assets in mid-caps and the rest in other types of companies or debt.

HDFC Small Cap Fund

SEBI Category assigned: Small Cap fund

This fund could earlier go from 80-100% into the stocks of mid and small cap companies, of which 0-20% could be in midcaps. Under the new rules, it must place 65% of its assets in small caps which are defined as companies below the top 250 by market capitalization. Up to 35% can go into other types of companies or debt.

HDFC Core and Satellite Fund (becomes HDFC Focused 30 Fund)

SEBI Category assigned: Focused Fund

Under the rules of the focused fund category, this scheme can invest in a maximum of 30 companies. Such a rigid limit was not previously there.

However no major reductions are likely to be forced on the fund – it currently holds just 24 stocks. The scheme’s benchmark has also changed from S&P BSE 200 to Nifty 500.

The fund was earlier allowed to place 90-95% of its assets in equity and the rest in debt. This is now 65-100% in equity, 0-35% in debt. In other words, it can become a lot less equity oriented.

HDFC Equity Fund

SEBI Category assigned: Multi-cap

The fund could previously allocate 80-100% of its corpus to equity and the rest to debt. This has been changed to 65-100% in equity, 0-35% in debt.

HDFC Capital Builder Fund

SEBI Category assigned: Value Fund

The scheme could earlier invest up to 100% of its assets in equity and no more than 20% in debt. This has been changed to 65-100% of its assets in equity and 0-35% in debt. In other words, the debt upper limit has been increased from 20 to 35%.

HDFC Infrastructure Fund

SEBI Category assigned: Thematic Fund

This scheme could earlier invest 65-100% of its assets in infra stocks and the rest in other companies or in debt. This has been made more stringent with a minimum 80% allocation to infra stocks and the rest in other companies or debt.

HDFC Multiple Yield Plan – 2005 (now HDFC Multi-Asset Fund)

SEBI Category assigned: Multi Asset Allocation

This fund could previously go from 80 to 95% into debt, with the rest in equities. It can now go from 10-80% in equities, 10-80% in debt, 10-80% in gold. In other words, it can cover a lot more ground at the fund manager’s discretion.

The scheme currently has 80% of its assets in debt, the upper limit under the new rules and the lower limit under the old rules. Major changes may be in store, for this fund.

In addition, under the new SEBI rules fund schemes can place 0-10% of their assets in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs). They can also place 0-10% of their assets in non-convertible preference shares. Apart from the above schemes, technical changes have also been announced in HDFC Taxsaver, HDFC Nifty ETF, HDFC Sensex ETF, HDFC Equity Savings Fund and HDFC Arbitrage Fund. You can get the full details here.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.