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That's what this fund is all about - putting a smile on the faces of cancer patients - giving them a reason to hope for a brighter tomorrow.
WF: Milind, heartiest congratulations on completing 10 successful years as an outstanding AMC. What a wonderful way in which you have decided to mark this special occasion! What was the genesis of this idea?
Milind Barve: Thank you. I recall when the company was set up with 24 employees way back in July-August 2000. Ten years is a long period and we were looking at how to commemorate this occasion in a manner other than the usual cocktail party where you quite often make speeches praising yourself and your achievements. I felt it would be good if we could do something philanthropic and it was a coincidence that we were in dialogue with the Indian Cancer Society. The Indian Cancer Society, based in Mumbai, is one of the oldest NGOs providing subsidy for treatment of cancer out of donations received every year. And they were looking for a way in which they could get sustainable funds to cover a larger number of patients. If you are a doctor you give free medical aid, if you are a lawyer you can give free advice. What an asset management can do is to manage money free of cost. That is how the idea of a product where we will not charge any investment and advisory fees was born. What we have launched is essentially a very simple three-year closed ended capital protection oriented income fund.
WF: I understand that the investor has an option to either donate 50% or 100% of the dividends? How would it work?
Milind Barve: There is no growth option, only a dividend payout option. We have sub options for investors, to either donate the entire (100%) dividend income that they are entitled to receive or 50%.
WF: Since it's not a usual fund and it will be hard to set sales targets, how are you asking your sales team to promote this and what is your message to your distribution fraternity?
Milind Barve: While we may have reasonable investment performance and we might have won awards, the product message is essentially carried through distributors. In this case also the product is going to be sold through distributors. The minimum amount is one lakh, which is not very large. We do believe that there are a fair number of investors looking for avenues to donate for causes and very often are not sure how to go about that. Since it is a three-year product, there is effectively a donation made every year for three years. So our strategy is to go through our distributors to investors and say that we have positioned this as a product with the intention of delivering a capital-protection-oriented investment. The principal invested is returned intact to the investor and only the income is donated. Thus we are uniquely combining an investment product with a philanthropic objective.
The entire cost of launching this product is being borne by the AMC. I am happy to say that even service providers like custodians and registrars have offered to do the work on this product free of cost. There is no asset management fee. There is of course a commission or brokerage to our distributors - which the AMC is bearing. We are spending a reasonable amount to promote the product. We have a commitment of Rs 10 crores from the HDFC Group. The AMC will also be an investor in the fund. We believe the cause really justifies the commitment.
WF: When you look back at the last 10 years of an eventful and successful journey, what are some of the turning points that have helped to shape HDFC AMC into the leaders that you are today?
Milind Barve: Well, I would not like to say that we are leaders, yes we are amongst the large players and it is very gratifying to look at where we are today from thousand crores in December 2000. I think a decade is a very small time in the life of an institution to measure success. I recall the period 2000-2003 was a time when the entire industry grew well on the fixed income products. We had one of the largest income funds, HDFC Income Fund at a time was approximately Rs. 5500 crores of net assets which was huge at that point of time. This was when people did not want to look at equity products because the market had corrected sharply after the technology and the dot.com bubble. 2003 indeed was a turning point because we successfully closed the acquisition of Zurich's asset management business, not so much for size but because they had high-performing equity funds which we needed to complement our fixed income expertise. 2003 to 2008 went into building our equity business.
2008 was a testing period for the mutual fund industry and thanks to the help from a lot of people including regulators, we were able to turn this period of crisis into an opportunity and bounce back.
When I look back I feel we have been able to grow because we showed agility in moving our businesses across two or three very distinct market cycles and did reasonably well across each of them. One of the turning points was also the period 2005 to 2008; when it was very fashionable to collect large amount of corpus through NFOs, we stuck to selling existing funds through SIPs. Very often we joke that we are not secular because we believe SIP is our religion!
WF: And you are one of the few AMCs that did not venture aggressively into sector funds...
Milind Barve: We believe that investors do not always understand the risk of being in a single sector, we believe that the industry is actually not a place for being unnecessarily innovative. When you are innovative you tend to become complex and so less understood. Therefore the biggest virtue of your products in this industry is actually simplicity and we have stuck to that.
WF: What is the agenda you are setting for HDFC Mutual Fund for the next ten years?
Milind Barve: We did not set an agenda for the last ten years. We will take it as it comes. However we understand we have to be responsible and display good levels of corporate governance and do the right thing every time. Growth is important for us but the method of achieving that growth is equally important and that would be our objective over the next few years. Growth and performance will come as long as we stick to this.
Disclaimer: The response to this questionnaire is for information purpose only and is not legally binding. This document should not be construed as an offer to sell or a solicitation to buy any units of HDFC Debt Fund for Cancer Cure (the Scheme). The figures, commentaries and analysis in this document reflect the views expressed by Mr. Milind Barve, Managing Director of HDFC Asset Management Company Limited (HDFC AMC), but does not represent its accuracy or completeness. The information contained in this questionnaire is not a complete disclosure of every material fact regarding the Scheme. The information / data herein alone is not sufficient and shouldn't be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on the author's views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient alone shall be fully responsible / liable for any decision taken on the basis of this document. The recipient(s) should before investing in the Scheme make his/their own investigation and seek appropriate professional advice. In view of individual nature of tax consequences, each investor is advised to consult his/ her own professional tax advisor for availing tax deductions under Section 80G of the Indian Income- tax Act, 1961. Mutual Fund investments are subject to market risks, read the offer document carefully before investing.
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