LAUNCHED in October '08, Principal Emerging Bluechip Fund is still an extremely young fund to write about. But within this very short span, the fund has already impressed its investors by its startling performance. As the fund was launched at the height of the financial crisis of '08, it received an extremely poor investor response initially, starting with an asset base of just about Rs 13 crore. But over the last year-and-a-half, this fund has grown to manage about Rs 240 crore of assets under management (AUM).
PERFORMANCE:
This fund began to invest in the markets when the others were fearful to enter the equity space. No surprises here to guess that Principal Emerging Bluechip definitely got its initial picks at extremely cheap valuations, giving it an edge over many other well-established peers. The fund's thoughtful picks during the financial turmoil resulted in the fund delivering about 10% return in '08, since the time of its launch, against the index gains of about 4-6%. The fund's benchmark index, CNX Midcap, returned about 7% during that period.
PERFORMANCE:
This fund began to invest in the markets when the others were fearful to enter the equity space. No surprises here to guess that Principal Emerging Bluechip definitely got its initial picks at extremely cheap valuations, giving it an edge over many other well-established peers. The fund's thoughtful picks during the financial turmoil resulted in the fund delivering about 10% return in '08, since the time of its launch, against the index gains of about 4-6%. The fund's benchmark index, CNX Midcap, returned about 7% during that period.
Having developed its initial pace, it was indeed interesting to see the fund spearhead almost all other diversified equity schemes in the following year. While it was reasonable for a fund investing in the mid- and small-cap segments to outperform the other large and multi-cap funds, the fund's performance in '09 probably turned out to be above all expectations. It returned more than 147% last year beating the Sensex and the Nifty returns of about 81% and 76%, respectively, as well as the 99% return by the CNX Midcap index. The average return by the category of diversified equity schemes was about 84% in that year.
Interestingly, in the current calendar year, even as the Sensex and the Nifty continue to trail about -2% and -1% respectively and the CNX Midcap has returned about 1%, Principal Emerging Bluechip has once again managed to retain its pace returning about 3% during this period.
PORTFOLIO:
Given its objective to invest in emerging companies, the fund's portfolio basically comprises mid- and small-cap stocks across all sectors. While an exposure to mid- and small-cap segments increases the risk quotient of any portfolio, the fund has made an attempt to mitigate the same by diversifying the portfolio extensively. Its AUM of about Rs 240 crore is thus welldiversified to incorporate nearly 70 stocks and exposure to a single stock is not more than 3%.
An analysis of the fund's portfolio over a period of time suggests occasional churning with most of the current portfolio having been invested in mid-'09. If one were to assess the fund's success ratio of its current portfolio, 65% of the scrips are currently in the profit zone while 21% are yet to recover the cost of acquisition. The balance 14% of the scrips comprise the latest picks by the fund and include stocks like Bhel, Exide Industries, Gammon Infrastructure, HDFC Bank, ICICI Bank, Infinite Computer Solutions, Jubilant Foodworks, REC, Sadbhav Engineering and Tata Steel.
As far as the fund's profitable scrips are concerned, they include Allahabad Bank, Corporation Bank, Orient Paper & Industries, Shree Cement, Bajaj Holdings & Investments, Gillette India, Oracle Financial Services, Castrol India and Crisil among others. At the same time, some of its picks currently trading below the purchase price include Bharti Airtel, KSK Energy Ventures, Sterlite Industries, Edelweiss Capital and DLF among others. If one were to assess the fund's sectoral preference, banking and finance accounts for nearly 14% of the fund's equity portfolio followed by energy with about 11%.
OUR VIEW:
Principal Emerging Bluechip has emerged as one of the outstanding funds in the category of diversified equity schemes and that, too, in a relatively short period of time. Having said that, it is important to note that this fund has been in the industry for a very short period of time and it needs to perform with similar consistently over a longer period of time to prove its excellence. Moreover, being a midcap oriented fund, it calls for a cautious investment by investors. Those looking forward to invest in this fund should take care to invest only a limited proportion of their equity investments in this fund.
