HDFC MF launches two new equity schemes

Mumbai: The initial offer for HDFC Mutual Fund's HDFC Core & Satellite Fund, an open ended diversified equity fund and HDFC Multiple Yield Fund, a hybrid fund. opens today, August 20, 2004, and closes on September 10, 2004.

The objective of HDFC Core & Satellite Fund is to generate capital appreciation through equity investments in companies whose shares are quoting at prices below their true value. The net assets of the scheme will be invested primarily in equity and equity related instruments in a portfolio comprising of "core" group of companies and "satellite" group of companies.

The "core" portfolio, which will constitute 60 to 80 per cent of the total, will comprise of well-established and large-cap stocks of companies with long, successful track records. The investment strategy of this portion will be focused with the "core" group investing in around 10-20 companies, with exposure to each stock being 3-8 per cent of the overall portfolio. The "core" group stocks are expected to provide greater stability and dependability to the overall portfolio.

The "satellite" portfolio will constitute the remaining 20-40 per cent. These would typically be small-mid cap companies with a potential for higher returns compared to the "core" group but would also carry greater risk. The investments in these "satellite" stocks will be spread over 10-20 stocks and hence, the average exposure per company would be between 1-4 per cent of the portfolio. This strategy aims to manage higher risk inherent in such companies by spreading it over a high number of stocks and thus limit the risk of the overall portfolio.

The investors will thus be benefited in striking a right balance for their investments due to the two portions of the portfolio viz., the "core" group of well-established low risk companies and the "satellite" group of higher return potential (as also higher risk) companies, which will complement each other.

The objective of HDFC Multiple Yield Fund is to generate positive returns with very low risk of capital loss over medium time frame. The asset allocation will comprise of 85 per cent (maximum. 95 per cent) of the net assets in debt and money market instruments and the remaining 15 per cent (maximum. 25 per cent) of the net assets in equities.