- Wealth PMS (50L+)
Here’s what I think.
1) It’s an NFO with nothing special, just tax saving diversified equity. You can get this from other, more established funds like HDFC Taxsaver, or Magnum Taxgain.
2) There is no real track record (HSBC Equity fund has underperformed all the major performing funds over the last two years). No other equity based offering from HSBC Investments (the AMC) has shown a stellar record.
3) There is no drop in the entry load (2.25%), and the recurring expense is estimated at 2.5% (greater than most funds) meaning that there is no benefit in investing in this fund as compared to other, existing, performing taxsaver funds.
Luckily there is no problem with initial expenses this time, they will be managed through the entry load only. Even so, some of the marketing expenses will probably need to be accounted for, as I feel they will cross the 2.25% limit (remember, this limit includes distributor commissions, which will likely be around the 2.25% limit). It’ll be interesting to see how the NAV performs, since the AMC will want to recover these extra expenses through the fund (perhaps by front loading these expenses?).
My view: You are better off buying a presently available fund with a good track record, like HDFC Taxsaver or Magnum Taxgain. They have generated very good returns in the past. Let the HSBC Taxsaver fund run through a year and we’ll re-evaluate it to see how it has performed. Perhaps it will be an outperformer, but now is too early to say.