HSBC MIP-Savings, launched in February 2004, has seen its assets under management (AUMs) rise 2.5 times to the tune of Rs 657 crore as on October 2010 from Rs 259 crore in November 2009. The fund has been ranked Crisil Fund Rank 1 (top 10 percentile of the peer set) over the last three quarters and has figured in the top 30 percentile over the last 14 quarters, underlying the aspect of consistent good performance. The fund is jointly managed by Sanjay Shah (debt portion), and Dhimant Shah and Aditya Khemani (equity portion).
HSBC MIP-Savings is classified as MIP-Aggressive by Crisil. MIP funds with an equity allocation between 15 and 30 per cent are classified as MIP-Aggressive, while those with an equity allocation lower than 15 per cent are classified as MIP–Conservative.
The risk profile of the fund falls between that of a pure debt fund and a balanced fund (greater than 50 per cent allocation to equity). This is beneficial to investors looking for a small equity exposure coupled with stable returns on a monthly basis. The higher debt component seeks to provide the necessary stability in returns for the fund.
Superior performance
The fund has given CAGR (compounded annual growth rate) returns of 10.36 per cent since its inception in 2004 and has outperformed its benchmark and its peers across different time frames.
An investment of Rs 1,000 in the fund in February 2004 (at inception) would have grown to Rs 1,943 on December 2, 2010. The same amount would have grown to Rs 1,621 if invested in the benchmark index and Rs 1,806 if invested in the peer group.
Consistent dividend pay-outs
Over a six year period, the fund has distributed dividends in 70 out of 72 months indicating a consistency in terms of dividend pay-outs. The two months where the fund missed to pay dividends were October 2008 and November 2008, when the credit crisis was at its height. The average dividend yield of the fund over this period is 0.65 per cent.
Portfolio analysis
HSBC MIP–Savings has had an average equity exposure of 17 per cent over the last four years. The fund manager has been able to effectively manage equity allocation based on market levels. When the equity market started to decline from the highs in January 2008, the fund reduced its average equity exposure to 11 per cent by March 2009. When the markets rebounded from this period onwards, the fund manager doubled the equity exposure in the fund to 22 per cent, thereby reaping the benefits from the equity market rally. The equity component presently stands at around 23 per cent.
The fund manager has actively managed the duration of the fund. Maturity signifies the interest rate risk inherent in the portfolio. Higher the maturity, higher is the interest rate risk. Funds benefit by reducing duration when yields harden and vice-versa. When the yields started to harden in 2008, the fund manager reduced the average maturity of the debt component to 2.22 years in July 2008. Subsequently, when yields dropped from 9 per cent to 5 per cent during the July–December 2008 period, the fund increased its average maturity from 2.22 years to 7.45 years and thus was able to benefit from the debt market rally.
The debt portfolio is well guarded in terms of credit risk-investments of the fund are in the highest rated debt papers and government securities. Over the past four years, 82 per cent of the fixed income portfolio is invested into these papers.
MIPs made simple
Monthly Income Plans or MIPs as they are popularly known, are mutual fund schemes that invest a majority of their portfolio (70-100 per cent) in debt and money market instruments and the rest (0-30 per cent) in equities. MIPs are suitable for investors who are willing to take some risk in the form of equity investments to achieve higher returns over traditional debt funds or fixed deposits.
MIPs generally provide investors with regular dividends to meet monthly income requirements. At the same time, investors need to note that the regularity of dividends is not assured and is subject to the availability of distributable surplus.
—Crisil Fund Services
