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IDFC Premier Equity Fund: A prudent choice for lump-sum investors
March 1, 2012

IDFC Premier Equity Fund, the best performing mid-cap fund, managed by Kenneth Andrade since June 2006, is now open for lump sum investments. As the mid-cap sector is trading at 37% 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. 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



 IDFC Premier Equity Fund: a prudent choice for lump-sum investors

Key Points

  • IDFC  Premier Equity Fund (PEF) is one of the best performing mid-cap 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 four times. 
  • The fund is currently open for lump sum investments from 01 March 2012, 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 four times. The fund was open for lump sum investments from 31 March 2011 to 15 May 2011. The fund has an average corpus of INR 2407.02 crores as at December 2011. Our previous three 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 37% 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

The fund invests in companies that have good long term potential and which are available at reasonable valuations.  The fund manager, Mr. Andrade, seeks to pick the stocks at their introduction stage (before herd follows it) and tries to play the entire growth cycle. The fund has exposure across market capitalisation and the average exposure to large cap stocks was close to 38% in over the last 3 years. The large-cap stock’s exposure mitigates the risk of exposure in small-cap companies and provide cushion to the fund in market down turn.

The fund takes cash calls depending upon the market outlook and also invest in debt securities when fund manager has defensive outlook on equity. The debt allocation was as high as 15% in March 2009 and went down sharply, close to 5% in April 2009 when equity market started going up. The cash holding of the fund is close to 7% over the last 3 years.

The top 5 holding (Page Industries, GlaxoSmithKline Consumer Healthcare, Bata India, Coromendel International and Asian Paints) constitute close to 21% of the portfolio and these companies are held since August 2009. On sectoral front, Textiles, Consumer Food, Power and Finance – NBFC are part of the portfolio since December 2007. The fund did not have exposure to banking sectors till July 2011 and entered the banking space in August 2011 with exposure to private banks. Since August 2010, the fund has more than 21% allocation into other equities but, the details such as companies and the amount invested has not been disclosed. 

 

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 89%, 44% and 12% returns respectively, while the fund has given whopping 219% returns. Therefore, if an investor has put Rs. 10,000 into the fund at its inception i.e., 28 September 2005, his investments would be worth INR. 31,941 as at 27 February 2012.

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 more than 37% 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. Midcap stocks have penchant to outperform large-caps in the long term.

We advise our investors to take an exposure in IDFC Premier, which is the best performing fund in its category, however they should be ready to bear the short-term fluctuations that arise when investing into mid-cap funds.

So, investors with more than 3 years of investment horizon and having a surplus available for investing into equities can consider IDFC Premier Equity fund!


To invest into this fund, click here


Disclaimer: 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 scheme information document including statement of additional information. 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 on the website.Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully before investing.



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