In the wake of the COVID-19 led disruption; restoration of the Indian economy is visible through various economic and market indicators. We are moving towards a fresh expansionary phase with vaccination progress and government initiatives that support the revival.
The equity market followed by a strong recovery indicates significant economic expansion and has uplifted investor sentiments in the mid-cap space. Mid-cap and small-cap stocks have had a positive run in the last one and half years.
Investors who want to diversify away from a concentrated portfolio of large caps should consider opportunities in midcaps. The mid-cap funds can serve as a cross-between the two market caps by offering more stability than small caps, and higher growth potential but with heightened volatility compared to large caps.
HSBC Mutual Fund has launched HSBC Mid Cap Fund; it is an open ended equity scheme predominantly investing in mid cap stocks. The fund house is of the view that this scheme will invest in innovative and new-age companies with disruptive product and service ideas to grow faster and build a portfolio at the beginning of the expansion cycle.
On the launch of this fund, Mr Ravi Menon CEO at HSBC Asset Management (India) Pvt. Ltd. said, “We do believe that mid-caps offer a more diversified universe for investment and with the current emerging themes it also offers quality investment opportunities. With a quality portfolio, we are confident that HSBC Mid-Cap Fund will be a healthy addition to the customer’s portfolio for long term compounding.”
Table 1: Details of HSBC Mid Cap Fund
|Type||An open-ended equity scheme predominantly investing in mid cap stocks.||Category||Midcap Fund|
|Investment Objective||To seek to generate long-term capital growth from an actively managed portfolio of equity and equity related securities of predominantly mid cap companies. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.|
|Min. Investment||Rs 5,000 and in multiples of Re 1/- thereafter. Additional Purchase Rs. 1000/- and in multiples of Rs. 1 thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
|Fund Manager||Mr Ankur Arora||Benchmark Index||NIFTY Midcap 150 Index TRI|
|Issue Opens||September 06, 2021||Issue Closes||September 20, 2021|
(Source: Scheme Information Document)
The investment strategy for HSBC Mid Cap Fund will be as follows:
HSBC Mid Cap Fund aims to predominantly invest in equity and equity related securities of midcap companies. The scheme will endeavour to seek growth and deliver above the benchmark returns by providing long-term capital growth from an actively managed portfolio comprising of midcap securities.
A top down and bottom up approach will be used to invest in equity and equity related instruments. The scheme’s Investments will be based on the 4Q investment approach with a focus on quality and quantum to identify opportunities:
- Quality of Business: Scalability of business, Competitive Advantage, Market Share, Longevity, Pricing power, Brand strength
- Quality of Management: Track record, Corporate governance, Promoter background, Capital allocation
- Quality of Earnings: Consistency in earnings, Capital intensity, Cash flow
- Quantum of Earning: Strong growth in earnings
The scheme will aim to maintain a portfolio spread across various industries/sectors to mitigate the concentration risk.
The fund manager is responsible for all buying/selling decisions in respect of the securities in the scheme’s portfolio and to develop a well-diversified portfolio with the aim of achieving the investment objective of the Scheme.
Under normal circumstances, asset allocation will be as under:
Table 2: Asset Allocation of HSBC Mid Cap Fund
|Instruments||Indicative Allocations (% of Net Assets)||Risk Profile|
|Equity and Equity related Instruments of midcap companies||65||100||High|
|Equity and Equity related Instruments of companies other than midcap companies||0||35||High|
|Debt instruments & Money Market Instruments (including cash & cash equivalents)||0||35||Low to Medium|
|Units issued by REITs and InvITs||0||10||Medium to High|
(Source: Scheme Information Document)
Who will manage HSBC Mid Cap Fund?
Mr Ankur Arora will be the dedicated fund manager for this scheme.
Mr Ankur Arora is Senior Vice President and Fund Manager – Equities at HSBC Asset Management (India) Private Limited. He is a CFA (CFA Institute, USA) and holds PGDM from (IIM Lucknow) and he has over 16 years of experience in Research and Fund Management. Prior to this, he was associated with Aegon Life Insurance as Vice President – Investments, Arvind Ltd. Head of IR, IDFC Asset Management Company Ltd. Associate Director and Fund Manager – Equities, ING Investment Management Associate Vice President & Fund Manager – Equities, Macquarie Securities Associate Analyst, Evalueserve — Team Lead, and at UTI Asset Management Company Ltd. as Management Trainee.
The other scheme Mr Arora manages is HSBC Small Cap Equity Fund.
Fund Outlook – HSBC Mid Cap Fund
HSBC Mid-Cap Fund aims to invest in quality mid-cap stocks with a flavour of small caps. It’s supported by disruptive and expansionary themes having great potential to deliver alpha.
The scheme offers potential to outperform in an economic up-cycle, gain exposure to the rapidly growing industries, and have better earnings acceleration from investments in emerging businesses.
The fund manager will actively build a portfolio through the bottom-up implementation of stocks and top-down approach for prudent risk control. Although several mid-cap stocks are expected to be potential large caps in the medium to long-term period and benefit with higher returns, midcaps are highly volatile in turbulent market conditions.
Thus, this scheme invests in quality midcaps and is suitable only for high-risk investors with a long investment horizon of at least 5-7 years, to survive market volatility in mid-cap space.
This article first appeared on PersonalFN here