HDFC Index Sensex Plus is passively-managed fund which invest 80-90 per cent of the portfolio in Sensex stocks
If you want to play it safe by being contented with the returns of the Sensex, and a little upside, then this one is for you.
The fund's strategy is to passively manage around 80-90 per cent of the portfolio which will be allocated to Sensex stocks in nearly the same proportion as that of the index. The balance 10 to 20 per cent will be actively managed enabling the fund manager to pick stocks that have the potential to outperform the Sensex.
Ever since inception, on an average, 82 per cent of the portfolio has been allocated to the 30 stocks of the Sensex. However, the actual allocation has ranged between 67 per cent and 100 per cent of the portfolio. And within the Sensex allocation, the fund manager uses his discretion. For instance, in 2009, the fund had an average exposure of 15 per cent to the Energy sector while that of the Sensex was 25 per cent. Currently, the fund's allocation to the sector is 16 per cent while the Sensex's is 22 per cent.
Again, while the fund has currently allocated around 9 per cent to Healthcare, it accounts for just 1 per cent in Sensex. The exposure to Metals is around 2 per cent while that of Sensex is around 8 per cent.
Two stocks - Jindal Steel & Power and Maruti Suzuki - that are part of the Sensex are not currently present in the fund's portfolio. Apart from this, there are currently 10 stocks accounting for 20 per cent of the fund's portfolio that are non-Sensex stocks.
Much to its credit, this fund has achieved what it set out to do. Over the 5-year period ended August 2010, it delivered an annualised return of 21 per cent against the Sensex's 18 per cent. Ironically, despite having a predominantly passively managed portfolio, it even beat the category average (18%). A feat that was even achieved last year when it delivered 81 per cent, almost equal to the Sensex's return though 7 per cent ahead of its category. The trump card: Being overweight on Financial Services.
In the market downturn of 2008, the fund beat the Sensex by a margin of 5.37 per cent. All through the year it did not plunge into cash but took this avenue only in the last quarter (December 2008) when it averaged around 19 per cent of the portfolio. When the market took a u-turn to begin its upward journey in March 2009, the fund was almost fully invested in equity. A move that helped tremendously.
Despite its different mandate, it's a worthy pick