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HDFC Multi Asset Fund uses P/E, P/B and yield gap to determine asset allocation. In India, yield gap (difference between earnings yield and bond yield) has proven to be one of the most effective parameters to drive allocation decisions. Mean reversion to historical yield gap averages isa powerful strategy for asset allocation decisions.
Srinivasan makes a case for MAFs to be evaluated on risk adjusted returns and not absolute returns. MAFs are meant to provide smoother investment journeys through diversification across asset classes. Smoother journeys cannot be evaluated on absolute performance – you have to look at sharpe ratio or other such parameters to better analyse multi asset funds.
The fund has been heavy on industrials, financials, healthcare and consumer discretionary sectors and at the margin, Srinivasan has been trimming positions in industrials with rising valuations.
Gold allocation which was at 15% 6 months ago, is now down to 11% as the fund trimmed its exposure after a strong rally in recent months.
Good discussion. We also need a discussion on HDFC BAF on the factors behind how it has been the top performers consistently.
Very aptly said, in MAF category there are funds with 65% long only equity to zero equity funds; to exposure to foreign (read USA) equity. Here the smoothness of journey is more important then the absolute numbers!! Thanks Vijay for bringing right people to talk the right things!!
