IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category
IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.
While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan (SIP) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for lump-sum investments only thrice so far — June 2006, October 2007 and January 2010 for a brief while only. It has now been opened for lumpsum investments once again in April 2011, but again for a brief period only.
Though launched at the end of 2005, IDFC Premier Equity has exhibited its potential only after Kenneth Andrade took over the management of the fund in early 2007. Strictly adhering to its philosophy of "buying cheap but good, and selling high", this fund has zipped past performance of many other well-established schemes in the category by distinctive margins. It zoomed past the 63% gains by its benchmark index — BSE 500 — by an overwhelming 111% in 2007. Then again, it succeeded in restricting its fall to about 53% against BSE 500's 58% in the meltdown year of 2008.The recovery era of 2009 saw the fund at its best once again, delivering 102% against BSE 500's 90% while last year despite extreme volatility on the Indian bourses, the investors of IDFC Premier Equity reaped a handsome 32% gain as against BSE 500's 16%.
Thus, so far, since the time of its launch, this scheme has enriched its investors by more than 226% absolute gains against 112% absolute returns by BSE 500 during the same period. This implies that every 1,000 invested in IDFC Premier Equity in September 2005 has grown to about 3,263 today.
It is rare to find extremely popular and well established scrips in the portfolio of IDFC Premier Equity. One can, however, definitely hunt for companies currently available cheap, but which have good growth potential and revenue earning visibility. IDFC Premier Equity was one of the very few schemes to pick up the then nonperforming stocks like Bata India in 2008. Similarly, it was one of the few schemes to foresee the embedded potential in the initial public offers (IPO) like Page Industries. Such stocks like Bata and Page have turned out as multi-baggers for the fund. Some of its other astute and timely picks include Motherson Sumi, Glaxosmithkline Consumer Healthcare, Bluedart Express, IRB Infrastructure, Coromandel International, Shriram Transport Finance and Asian Paints. Each of these scrips was picked at extremely cheap valuations way back in 2008-09 and has reaped remarkable yields for the fund so far.
The fund manager appears to be on a hunting spree once again as the fund's latest portfolio is loaded with a good number of new picks. These include Globus Spirits, Tilaknagar Industries, United Spirits, Whirlpool, Bajaj Electrical, Kaveri Seed, Gujarat State Petronet, P&G Hygiene & Healthcare, Nilkamal, PTC, Arvind and Cox & Kings.
A high exposure to an otherwise defensive FMCG sector is clearly
evident and this, once again, signals the fund manager's investment approach of sailing against the tide. Despite Banking and Financials being the most sought after sectors currently by most mutual fund schemes, IDFC Premier Equity prefers to stick to its reflexes and has opted for FMCG instead. Will the dice roll in favour of the fund manager once again — as it has been in the past — will be worth a watch!
OUR VIEW :
Notwithstanding the fact that IDFC Premier Equity falls under the cadre of mid- and small-cap categories of schemes, its astute equity picks make the fund less vulnerable to this presumed high risk category. Investors with little risk potential can consider IDFC Premier Equity for investments. Investors may do well to consider a target investment period of 3-5 years as the companies sought by this scheme may take time to reap returns.