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IDFC Premier Equity Fund: A prudent choice for lump-sum investors April 5, 2011
IDFC Premier Equity Fund, the best performing midcap fund, managed by Kenneth Andrade since its inception as at 28 September 2005, is now open for lump sum investments. In this article, we talk about the reasons that make this an appealing offer for retail investors who wish to invest in equities.
Author : iFAST Research Team


Untitled Document

Key Points

  • IDFC  Premier Equity Fund (PEF) is one of the best performing midcap equity fund
  • Generally, one can invest into this fund only through Systematic Investment Plan (SIP)
  • Since the fund's inception, the fund had allowed for lump sum investments into the fund only three times. 
  • The fund is currently open for lump sum investments from 31 March 2011, until further notice from the AMC

Lump sum Investment Offer

Since the NFO closure, the IDFC Premier Equity Fund has accepted lump sum investments only thrice.  The fund was open for lump sum investments from 27 January 2010 to 26 February  2010 last time. The fund has an average corpus of INR 1074.19 crores as at December 2010. Our previous two analysis show that the fund has been a best performer in our recommended  midcap funds list. However, it wasn’t part of the Recommended Fund list as the fund accepted investments only through the SIP mode.  As the mid-cap sector is trading at 30% below its all-time high, we believe that the investors with a risk appetite for the mid-cap sector can consider investing in this fund.

Investing Strategy

From November 2007 to February 2011, the fund on an average has held about 7.6% of its assets in cash and 7.6% into debt investments. Equity investments on an average make up about 84.6%. The equity allocation in the portfolio has never fallen below 73%.

Since November 2007, the fund continues to have investments into Auto Ancillary, Consumer foods, Finance – NBFC and Power Generation / Distribution sectors. Surprisingly, the fund has no investments in the banking space from May 2009. However, it has investments in the Non Banking Financial Companies (NBFC). Since, August 2010, the fund has more than 20% allocation into equities but, the details such as companies and the amount invested into each of those companies has not been disclosed. 

From the past one year, the fund has had allocation to TV Broadcasting, Textiles, Power Generation / Distribution, Paints, Industrial Gases and Fuels, Finance – NBFC, Fertilizers and Engineering – Constructions, Consumer food and Auto Ancillaries sectors.

Chart 1: Periodic performance of IDFC Premier Equity Fund, Average of Mid-cap Funds and BSE 500


Performance

As seen from Chart 1, the fund has not only outperformed its benchmark, the BSE 500 Index but has also, outperformed the mid-cap fund category average returns. Chart 2 shows the relative performance of the fund in comparison with BSE Midcap Index, BSE Small cap Index and BSE 500 Index since its inception. The BSE 500, BSE Midcap and BSE Small Cap indices since the fund inception have given 110%, 62% and 38% returns respectively, while the fund has given more than 200% returns. Therefore, if an investor had put Rs. 10,000 into the fund at its inception i.e., 28 September 2005, his investments would be worth INR. 31,114 as at 30 March 2011.

Chart 2: Relative performance of IDFC Premier Equity fund with BSE 500, BSE Midcap and BSE Small Cap indices

Our Take on the Fund

With the BSE Midcap Index currently trading 30% lower than its all-time high of January 2008 , the fund manager would be scouting for good mid-cap stocks that are available at attractive valuations.

Hence, we advise our investors to look at good mid-cap funds, however, investors should be aware of the volatility involved in midcap funds and hold it for a long term.

We recommend IDFC Premier Equity Fund to all our investors who have been waiting to put in lump sum into equities with a time horizon of more than 3 years.

To invest into this fund, click here

iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.

 


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