IDFC Premier Equity Plan A might appear risky, but it does a good job in all market conditions
In the four years of its existence, this fund has beaten the category average all through. In 2007, it trounced the competition with a return of 110 per cent (category average: 64%). In the bear phase running from January 8, 2008 to March 9, 2009, it shed 54 per cent (category average: -64%).
Fortune does favour the brave. Fund manager Andrade boldly rides his bets in terms of substantial top sector allocations. The highest he has gone to is 44.74 per cent (Services in May 2007). Now he is casting his lot with FMCG (25%) and Services (23.66%), two sectors he has been betting on since last year.
Neither does he shirk from taking contrarian stands; his bias towards Services ever since inception and his restraint from going heavy on Energy or Metals, even if the sectors are gaining impressively, are cases in point. "This fund attempts to capture shifts in the business environment with regard to new business opportunities, technologies and trends. We try to position ourselves ahead of the chain. It may or may not pay off but we must have sufficient reason to believe in what we are investing in," he says.
His convictions haven't let him down. In 2007 he did not jump into Metals but delivered 46 per cent higher than the category average (BSE Metal: 121.47%).
The focus on small companies, strong top sector bets and a fairly tight portfolio (between 20 and 36 stocks), gives the appearance of a risky offering. It's not. Individual stock allocations do not cross 7 per cent (barring Shree Renuka Sugars). And if one looks at the quarterly returns, this fund has shielded its investors better than its peers during downturns.
Last year the fund erred on the side of caution and Andrade began to lower equity exposure only in the second half of the year. "The companies in this segment are not very liquid. We don't want to be caught on the wrong foot and have to ensure ample liquidity for redemptions, so that we don't disturb the entire portfolio," he says. The weighted average market capitalisation of the fund's portfolio was around Rs 4,000 crore (1-year as on April 30, 2010), while that of its peers stood at Rs 6,200 crore. With a stock focus on smaller fare, Andrade has an interest in keeping the fund size small, hence the periodic closure for fresh investments.
This fund has the highest annualised return (27%) over the 3-year period ended April 30, 2010.
