HDFC Flexi Cap Fund: Growing through High Conviction Bets

Flexi Cap Mutual Funds are equity-oriented mutual funds that invest a minimum of 65% of their assets in equity and equity-oriented instruments of companies across the market cap range without any upper or lower limit.

Depending on market conditions, liquidity conditions, and valuations, the fund manager of a Flexi-cap Fund can manoeuvre among large-caps, mid-caps, and small-cap stocks. This gives fund managers greater scope to identify alpha-generating opportunities from a large universe of stocks which can reward investors with superior risk-adjusted returns over the long term.

[Read: Best Flexi Cap Mutual Funds to Invest in 2023]

HDFC Flexi Cap Fund is one of the most popular Flexi Cap Funds that has bounced by superior returns in the last couple of years and rewarded investors for their patience.

Past performance is not an indicator of future returns
Data as on January 18, 2022
(Source: ACE MF)

HDFC Flexi Cap Fund has registered superior long term performance record. In the last one year, HDFC Flexi Cap Fund delivered absolute return 13.4%, thereby outperforming the benchmark and the category average by a remarkable margin of 13 and 15.5 percentage points, respectively. The superior performance in recent years has significantly improved its long-term returns. The fund now stands among the top quartile performers in the category across time frames and has also generated noticeable alpha over the benchmark.

The bouts of underperformance and ensuing sharp uptick in returns has resulted in higher volatility compared to the benchmark and its peers. Nonetheless, HDFC Flexi Cap Fund has compensated its investors well by recording higher risk-adjusted returns, as denoted by its Sharpe ratio.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

Investment strategy of HDFC Flexi Cap Fund

Categorised as a Flexi Cap Fund, HDFC Flexi Cap Fund has the ability to dynamically allocate assets across market caps. Accordingly, it aims to create a diversified portfolio spread across major industries, economic sectors, and market capitalization that offer an acceptable risk-reward balance. The scheme predominantly invests in companies that:

a) Are likely to achieve above average growth

b) Enjoy distinct competitive advantages, and

c) Have superior financial strength

HDFC Flexi Cap Fund maintains a large-cap biased portfolio wherein it invests 70-80% of its assets, with the remaining in mid-cap and small-cap stocks. The fund has high conviction in most of its stocks and holds them with a long term view. It has recorded a low turnover ratio of 20-40% in the last one year.

HDFC Flexi Cap Fund usually holds around 45-55 stocks spread across market caps and sectors. As of December 31, 2022, the fund held 48 stocks with the top 10 stocks accounting for 51.3% of its assets. Popular large-cap names such as ICICI Bank, SBI, HDFC Bank, and Infosys currently form part of its top holdings. The fund has limited exposure to individual stocks in the mid-cap and small-cap segment to under 2%.

In the last two years, HDFC Flexi Cap Fund benefitted the most from its holdings in SBI, ICICI Bank, L&T, ITC, Coal India, NTPC, and Bank of Baroda. Axis Bank, Hindustan Aeronautics, Bharat Dynamics, Bharti Airtel, and Infosys were among the other contributors to its gains.

In terms of sectors, HDFC Flexi Cap Fund's portfolio is skewed towards Banking & Finance stocks that collectively form 36.8% of its assets. It holds substantial allocation in infotech and Engineering that form another 20.9% of its assets. The fund also holds diversification to Power, Telecom, Auto, Petroleum, Pharma, and Oil & Gas, among others.

Suitability

HDFC Flexi Cap Fund has generated superior long term returns and has found place among the top performers in the category. While HDFC Flexi Cap Fund is not a great bear market performer, its return profile surely stands out during bull phases. Although the fund may witness underperformance in the short run due to its value-oriented approach, it has the potential to bounce back and generate superior over complete market cycles. The fund has a reliable track record of delivering reasonable risk-adjusted returns over longer time periods.

HDFC Flexi Cap Fund follows sound investment process and has an experienced fund manager at the helm. Further, it holds a high conviction and well-diversified portfolio of stocks across industries, which has proved to be rewarding for investors in due course.

HDFC Flexi Cap Fund is suitable for investors long term investors looking to benefit from diversification and flexible investment approach.

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013