HDFC MF to convert HOF to open-ended

Mumbai: Come January 19 and HDFC Mutual Fund (MF) will convert one of its under performing close-ended fund to open ended one. To elaborate it, the fund house has told its investors a month in advance that it plans to convert the close-ended Housing Opportunities Fund Series-I (HOF) to an open-ended one on January 19. The reason being cited behind the fund house's move is that the fund in its existing form has proved to be a lacklusture one when it comes to its performance. The three-year close-ended scheme has got an asset under management of Rs 3,088 crore.

The fund was launched on December 6, 2017 with a tenure of 1,145 days and is due for maturity on January 18, 2021. The NAV of the scheme stood at Rs 9 .46 per unit as of December 14. The scheme has given a return of -1.74 per cent as against 9.65 per cent posted by its benchmark. Since its inception, the scheme posted -3.18 per cent against a benchmark return of 7.12 per cent. As on November 27 an investor who had invested 10,000 in the scheme since inception has reduced to Rs 9,082. The scheme has underperformed compared to other closed ended funds that were launched by the mutual fund industry during the same time and also its benchmark.

Since the scheme was planned to mature in the month of January 2021, it had increased allocations to low returning liquid assets and during the same time the equity market remained buoyant and delivered much better returns during the recent few months. It would have been better for investors to not have invested in this fund and rather invest in other opportunities.

"Compared to peer groups, the fund has been a poor performer," said Vineet Nanda, founder, Sift Capital, adding that investors could move out to quality funds to improve their portfolio returns. However, in a note to investors, the fund house said that housing and allied sector like steel and cement are growing at a healthy pace, supported by broad-based improvement in economic activity.

Existing investors are advised to use the free look period available till January 18, 2021, to redeem their holdings in the scheme without exit load. If one redeems the investment beyond the free look period, an exit load of 1 per cent will be applicable.