Prashant Jain Quits HDFC AMC. Is This a Cause of Worry for Investors?

July 25, 2022 Mutual Fund

In a regulatory filing HDFC AMC on Friday, July 22, 2022 announced that Chief Investment Officer and star fund manager, Mr Prashant Jain, has tendered his resignation. The reason for his exit is not known.

Mr Jain has collective work experience of around 28 years of which 19 are with HDFC AMC. Before this, he was working with Zurich AMC (which was later acquired by HDFC AMC) and SBI Mutual Fund.

At present, Mr Jain manages HDFC Balanced Advantage Fund, HDFC Top 100 Fund, and HDFC Flexi Cap Fund. Mr Jain has been managing HDFC Balanced Advantage Fund since its inception in 1994, thus becoming the first fund manager in India to manage a fund for over 28 years. He has also managed HDFC Top 100 Fund and HDFC Flexi Cap Fund since their launch in September 1996 and January 1995, respectively. Under his supervision, the assets of these schemes have grown leaps and bounds and currently have an aggregate AUM of Rs 89,500 crore (as of June 30, 2022).

Table: Schemes managed by Mr Prashant Jain at HDFC Mutual Fund

AUM as of June 30, 2022. Returns as of July 21, 2022
Direct Plan – Growth option considered. Past performance is not an indicator of future returns.
(Source: ACE MF)  

HDFC Top 100 Fund has clocked returns at a CAGR of 18.7% since its launch, while HDFC Flexi Cap Fund and HDFC Balanced Advantage Fund have delivered returns at 18.3% and 17.9% CAGR, respectively.

Mr Prashant Jain is known for his value-oriented investment strategy and is averse to investing in momentum-driven bets, even if it leads to short-term underperformance. This strategy worked in his favour resulting in him becoming one of the most celebrated fund managers in the Indian mutual fund industry.

However, the schemes witnessed a prolonged rough phase between in 2015 and then between 2018 and 2020 due to higher exposure to public sector companies, that moved out of favour during this period. Nonetheless, the schemes displayed turnaround growth as value as an investment strategy outshined growth-oriented strategy from the latter half of 2020. These schemes currently stand among top quartile performers in the last 1-year and 2-year period.

Should investors in HDFC AMC worry about Prashant Jain’s exit?

While Mr Prashant Jain has been a star fund manager at HDFC AMC for many years now, investors need not worry about his exit. HDFC AMC has a strong team of seasoned fund managers who have been associated with the firm for many years.

With Mr Jain moving out, HDFC Mutual Fund has approved the appointment of Mr Chirag Setalvad as Head – Equities and Mr Shobhit Mehrotra as Head – Fixed Income.

Mr Setalvad has been part of the investment team since inception of the company, excluding a brief stint of 2.5 years outside starting October 2004. He re-joined the AMC again in March 2007 and has been with the company since then. He currently manages HDFC Small Cap Fund, HDFC Mid-cap Opportunities Fund, HDFC Hybrid Equity Fund, and HDFC Children’s Gift Fund.

Mr Mehrotra has been with HDFC Mutual Fund for over 18 years and is presently managing few Fixed Income schemes such as HDFC Credit Risk Debt Fund, HDFC Floating Rate Debt Fund, HDFC Hybrid Debt Fund, HDFC Medium Term Debt Fund, HDFC Income Fund, among few others.

According to a statement by HDFC AMC both Mr Setalvad and Mr Mehrotra are capable Investment professionals, ready to take-up the mantle of heading the Equities and Fixed Income function and are well supported by highly experienced and committed team of Investment professionals.

Thus, a change in fund manager does not warrant any portfolio action. You should only look for alternatives if you find the performance of a fund unsatisfactory over a longer duration, compared to the peers and the benchmark based on qualitative and quantitative parameters. Further, you can consider switching to another fund if the scheme’s investment objective and/or investment strategy undergoes changes, and is no longer in congruence with your investment objectives.

This article first appeared on PersonalFN here