Risk Management Strategies in Asset Management Companies in India: A Study of HDFC AMC (2019–2024)

Abstract

The Indian asset management industry has been on a high growth trajectory and has also witnessed the advent of circulating complex financial risks that require effective mitigation. This case study dives through the risk mitigation strategies at HDFC Asset Management Company (HDFC AMC) from2019 to 2024 when the capital markets-induced havoc across the sectors and countries through regulations was hitting all sectors, including Asset Management (ex., COVID-19 pandemic) across the globe. We adopt the lens of the risk framework to financial reports and risk disclosures, along with some quantitative techniques, to explore the risk management process in HDFC AMC utilizing statistical methodologies like regression analysis, value-at-risk (VaR), Beta & Sharpe Ratio.

The study adds that HDFC AMC has effectively reduced capital market, credit, liquidity, and operational risk with its diversified portfolio, active asset allocation, strong credit risk, and regulatory norms lay down by SEBI. It was less volatile as a company (Standard Deviation: 533.23) and boasted a lower beta (0.326) than the broader market, therefore limiting exposure to systemic risk. A Sharpe ratio of 0.1334 and risk-adjusted return of 0.9112 reveal sound return optimization with controlled risk. This study showcases the robustness of HDFC AMC strategies to deliver consistent performance in a financially-stressed environment, thereby serving as a template for risk management for Indian asset managers.

Thus, this study sheds some light on the degree of effectiveness of risk management frameworks in AMCs, thereby contributing to the slowly growing literature surrounding risk mitigation within financial services. It provides actionable insights on how predictive risk analytics, liquidity, and regulatory compliance can be enhanced to foster financial stability within an increasingly dynamic market landscape.