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Mutual Fund Review: HSBC MIP Savings Plan

Name: HSBC MIP Savings Plan-Growth
Type: Open-Ended Debt-MIP
Fund Manager: Mr. Shailendra Jhingan, Mr. Jitendra Sriram & Mr. Viresh Mehta
Inception Date: February 13, 2004

Monthly Income Plan (MIP) are the marginal equity funds that provides a conservative investors the stability of debt and growth potential of equities. In MIPs, typically a large portion (75-100%) of the fund is invested in debt and money market instruments and the rest in equity. MIPs are typically suitable for investors who want to largely play it safe, but don't mind taking a little risk in order to increase the potential returns than pure income/debt funds would provide.

HSBC MIP is an open-ended income scheme with the primary objective to seek generation of reasonable income through investments in debt and money market instruments. The secondary objective of the scheme is to invest in equity and equity related instruments to seek capital appreciation. The scheme's savings plan is aggressive in its equity allocation and could invest up to 25% in equities and equity related instruments and up to 100% in debt and money market instruments (including cash and money at call).
 
The scheme has grown at a CAGR of 9.25% since its inception in February 2004 and has comfortably outpaced its benchmark and peers during the selected time frame. Higher equity allocation and vibrant equity markets along with the judicious asset allocation in debt & money market instruments has enhanced the returns of the scheme. Its one year and two year returns at 9.91% and 10.68% are superior to the returns posted by peers and benchmark for the same period As on August 2006 the scheme has an asset base of Rs 80.36 crore and has declined by Rs 21 crore compared to the pervious year same period.
 
Although the scheme could invest upto 25% of its assets in equities but the scheme have restricted its average equity allocation to 20.4% in last one year. As on August 2006 it has apportioned 48.34% of its assets in debt, 20.48% in equities and rest in cash & equivalent. Its debt component has been fluctuating in the range of 39% to 61% over last one year with average allocation at 48.3%.
 
 
 
The scheme has allocated 24.8% of its debt portfolio in securitised debt securities and 13.7% in commercial bond. It has invested 16% of its assets in AAA rated papers, 8.6% in AAA (SO) rated and 9.95% in AA+ (SO) rated paper. As on August 2006 it had an average maturity of 555 days and is higher than the category average. On the equity side its portfolio is spread across 16 stocks which seem to be large for fund with an asset base of Rs 80 crore and equity allocation at 20%. Top five holdings account for less than half of its equity portfolio with Reliance in top place. The scheme has large cap oriented portfolio and IT sector has received highest exposure at 24% followed by Diversified and Oil & Gas sector at 17% and 9% respectively.
 
Minimum investment required to enter the scheme is Rs 5000 in growth option and Rs 25000 in monthly dividend option and Rs 10000 in quarterly dividend option. It charges an Exit load of 0.5% for investments less than Rs 10 lakh and if redeemed within 6 months and nil for investment amount greater than Rs 10 lakh. While no entry load is charged for the scheme. It is benchmarked against Crisil MIP Blended Index. Expense Ratio of the scheme as on July 31, 2006 is 1.95% and is in line with the category average of 1.95%.

MIP schemes have been doing well from quite some time thanks to the soaring equity markets. HSBC MIP Savings Plan is an aggressively managed MIP scheme as it could invest upto 25% of its assets in equities and is thus suitable for the investors having risk appetite for the same.
 

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