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%.
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.
The
Research Team is a part of iFAST
Financial India Pvt Ltd.
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.
