How HDFC Flexi Cap Fund of Prashant Jain Underperforms in Raging Bull Market ?

HDFC Mutual Fund is among the Top 3 Aseet Management Companies in India on the basis of AUM and not on the basis of performance of schemes it manages. In 2018, I stopped investing in HDFC Funds and started redeeming. Today I would like to highlight how HDFC Flexi Cap (erstwhile HDFC Equity Fund) managed by the legendary Fund Manager, Prahsant Jain under-performed even in a raging Bull Market, while he continues to draw Salary in excess of Rs 6 Crore YoY (ESOP Additionally given, I don’t know about that).

I shifted my investments to FlexiCap Funds in PPFAS, PGIM and DSP with redemption from HDFC. It is well known fact that the problem with Prashant Jain is he BUYs a Scrip and continues to HOLD ir-respective of years of nonperformance in its price. For Example ICICI Bank price went no where between 2009 to 2020 and this was like 8% Holding in HDFC Flexi Cap Fund. Unfortunately, Mr. Jain refuses to acknowledge and correct himself.

Now How is Holding a Non-Rising Scrip a Problem ?
Mr. Jain held 8% of this Folio for 10+ years in ICICI Bank during that time your SIP investment went into this and stayed at the same price. Now you will argue, that’s good because we will accumulate more units and when it rose in 2021, we will have bumper returns. Wrong. Return Over Investment has “Time” as the primary factor which decides your return. So you have to think from that perspective, the investment was dead for 10 long years. Imagine the returns, if a Scrip which has kept rising by just 10% YoY in the last 10 Years and was part of this Portfolio instead of ICICI Bank. This means, Mr. Jain & his Team at HDFC FlexiCap Fund are averse to Researching new Companies.

This is just one example, Mr. Jain has held to many such scrips during the last decade which is a lost decade of returns for HDFC FlexiCap Mutual Fund Investors.

Now let us demonstrate how Mr. Jain has under-performed in this Bull Market as well.
Since I had now committed to FlexiCap Funds of other AMCs, I had put a Spreadsheet to Track the Performance from Jan 2021. Here is how the Funds performed from Jan to June 2021 – Absolute Returns.
DSP Equal NIFTY 21%
PPFAS Flexi 17.5%
DSP Flexi 17.91%
PGIM Flexi 21.7%
HDFC Flexi 23.12% This was the Winner. I had no doubt that this performance will not be consistent.

I reviewed the performance again today. Here is the Absolute Performance from Jan to Sep
DSP Equal NIFTY 32.7%
PPFAS Flexi 37.92%
DSP Flexi 33.41%
PGIM Flexi 41.01%
HDFC Flexi 30.08% Here we go. Mr. Jain under performs even DSP Equal NIFTY 🙂 So Mr. Jain’s policy of not researching new companies and continuing to HOLD NPAs while giving the explanation of value, companies failing investment grade, etc has failed again. In my opinion, unless and until he introspects thoroughly, HDFC FlexiCap Fund returns will be mediocre.

In conclusion, I feel, HDFC AMC has a severe flaw in the Investment Management Process itself. It is time they also replace the Chief Investment Officer as well. Recall, they replaced their Managing Director and let go the horrible performing Mr. Milling Barve.

Disclosure: I’m not a SEBI Registered Investment Adviser and please do not consider this is as an Investment Advise. This is solely on my personal investment experience.