HSBC Mutual Fund CEO says active asset allocation funds are the best way forward

Actively managed mutli-asset solutions is the way for mutual fund investors as they minimise volatility and do asset allocation keeping in mind the risk profile of investors, says Puneet Chaddha, the chief executive officer, HSBC Mutual Fund.

The fund house recently launched HSBC Managed Solution, an open-ended fund of funds (fof) scheme that will invest in various asset classes including domestic and offshore equity, long and short term debt and gold ETFs.

Speaking to Money Today, Chaddha said globally these funds have been very popular, though in India they are yet to catch investors' attention. "The ones that are already there are not like the fund we have launched. Many of these funds are based on mathematical models, which do not always work. These are static asset allocation, which at times would work and at times don't," says Puneet Chaddha.

He further says that in most existing multi-asset funds, there are only two assets-equity and debt, while HSBC Managed Solution invests in domestic equity--large-cap, mid-cap; domestic bond-long bond, short bond, gold, and offshore equity

Since HSBC Managed Solution is a fund of funds scheme, the money collected would be invested in the units of HSBC or other third party funds.

"Most of corpus would be invested in units of HSBC Funds because our funds do not have exit loads (a charge, usually 1% of the asset value, on exit from the fund within a specified time), and since it is an asset allocation fund there would be cost associated with rebalancing of portfolio if we invest in other funds, which have exit loads," he says.

He cited another reason for investing most of corpus in HSBC funds. "Unlike our funds, other mutual funds schemes, for example large-cap funds, have a mix of large- and mid-cap exposure, which would dilute the 'character' of HSBC Managed Solution portfolio."

Asked whether HSBC Mutual Fund was planning to launch any pension fund, Chaddha said that HSBC Managed Solution is the fund that can be used to pension savings by investors.

But will it work without tax benefits? "We had long discussions with Sebi (the Securities and Exchange Board of India), and they have some genuine concerns about the scheme, they also need some policy changes. If I had to wait for the tax-break, the launch of the product would have been too late," he says.