HDFC Mutual Fund converts closed-end fund into open-ended

HDFC Mutual Fund is converting its underperforming Housing Opportunities Fund (HOF)-Series 1 - the industry's largest equity closed-ended fund with assets of ₹3,088 crore - into an open-ended scheme just a month before its maturity.

This means the product will continue to function without any lock-in or restrictions and new investors will be allowed to put in fresh money. Investment advisors are recommending that existing investors exit the product because of its underperformance.

HDFC HOF Series 1 was launched as a close-ended fund in November 2017, with a tenure of 1,440 days, which ends on January 18, 2021.


Investors in the fund locked in for three years have lost an annualised 1.14% over the period.

Existing unitholders have an option to exit at the prevailing NAV, without exit load, from December 18, 2020 to January 18, 2021.

"Compared to peer groups, the fund has been a poor performer," said Vineet Nanda, Founder, Sift Capital. "Investors could move out to quality funds to improve their portfolio returns."

Advisors believe three years is a long time given that the fund has been investing in a wide range of sectors and investors could move out. "It is hard to believe that a scheme will perform now, if it did not do so for the last three years," said Vidya Bala, co-founder, Primeinvestor.in