HDFC AMC’s star fund manager Prashant Jain has seen two of his schemes downgraded by Morningstar recently. HDFC Top 100 and HDFC Equity have been downgraded from ‘gold’ to ‘silver’ by the mutual fund (MF) research house.

“Prashant Jain’s long-term investment approach to investing, which entails taking high-risk conviction bets and sticking to them if they underperform over the short term, has often yielded satisfactory results,” said Himanshu Srivastava, senior analyst at Morningstar.

“The execution has been noteworthy. Yet, there have been occasions when the strategy has resulted in significant underperformance for the fund, such as in 2013 and 2015,” he added.

While the fund’s ability to make a comeback after hitting a trough was taken into account, the grading note also observed that the risk in strategy had also risen steadily.

According to data from Value Research, HDFC Top 100 fund is down 21 per cent in a one-year period, as against 11.45 per cent dip in the BSE 100 total return index. HDFC Equity Fund is down more than 23 per cent in the same period, as against a 10.9 per cent dip in BSE 500 total return index.

Both the schemes have been popular among MF investors and are among the larger schemes in their respective categories.

As of June 30, 2020, HDFC Top 100 had assets under management of Rs 15,481 crore. HDFC Equity fund had asset base of Rs 18,495 crore.

The Morningstar note pointed out that Jain’s investment strategy has not been able to fully adapt to changing market dynamics. “Consequently, while the risk in the strategy has gone up sharply, there are times when the fund has been found wanting in terms of generating commensurate returns for investors,” Srivastava said.