There is a definite and growing buzz around IDFC Premier Equity, given its stellar show since 2007. The subprime crisis may have dealt a blow, but the revival has been much faster than the brief slide
IDFC Premier Equity is well recognised in the mutual fund industry as a mid-cap fund. The underlying philosophy of this fund is to invest in small- and mediumsized companies which have a good longterm potential, and hold on to these stocks until they evidently emerge as large-caps of the equity market. This has given IDFC Premier Equity an edge over many of its midand small-cap peers. No wonder then, that this mid-cap fund has successfully grown from less than 200-crore assets under management (AUM) in early 2007 to more than 1,700 crore AUM today. While the valuation of its equity portfolio definitely has an important role in boosting its AUM, IDFC Premier Equity does appear to have stirred up investor interest, given its powerpacked performance since 2007.
PERFORMANCE:
Launched in September 2005, IDFC Premier Equity had a slow start. IT underperformed its benchmark index, the BSE 500, as well as the Sensex and the Nifty by high margins until Kenneth Andrade took over the management of this fund in February 2007. The fund's performance has changed ever since. Led by a fantastic rally on the bourses, IDFC Premier Equity notched up a whopping 110% gains in 2007 against BSE 500's 63% returns that year. Many then argued that the fund's high mid-cap exposure played an important role in arresting its performance in 2007, the year that witnessed many midand small-sized companies getting carried away by the market momentum.
But if that were the case, then the fund's ability to curtail its fall in the following meltdown year of 2008 came as another surprising shot to calm its critics. While the fund's net asset value did decline ruthlessly by about 53%, this decline was much lower than what was anticipated from such a mid-cap oriented fund. BSE 500 declined by nearly 58% that year.
Though the fall was hard, the recovery was faster. 2009 saw the fund regain its pace as it rewarded its investors by delivering nearly 102% returns against BSE 500's 90% returns then. Continuing its pace even in the current calendar year, IDFC Premier Equity has so far delivered about 35% gains since January this year against BSE 500's 13% gains in this period. This fund has enriched its investors by about 255% since its launch. In a nutshell, every 1,000 invested into this fund at the time of its launch, is worth 3,550 today.
PORTFOLIO:
Predominantly into midcaps, IDFC Premier Equity's portfolio does have a little exposure to large-cap stocks, prominent among them being Asian Paints and GlaxoSmithKline Consumer Healthcare which the fund has been holding for over a year now. Most of its current stock holdings are at least an year old, in line with its philosophy of holding onto its investments till they emerge to be-come the prospective large-caps. A prominent example of this philoso-phy is the fund's investment in page industries nearly three years ago. The stock of the makers and marketers of Jockey brand in India has trebled in values since then.
Other profitable investments made by the fund include stocks of Coromandel International, Shriram Transport Finance, Emami and Bata India. Each of these stocks have been a part of the fund's portfolio for over two years now.
IDFC Premier Equity is thus an investor's fund and not a trader's fund, with only a little churning in the portfolio. While a low turnover does provide a sort of stability to the portfolio, many investors, especially those with high risk appetite, may not well agree on this practice, as a mid-cap fund is expected to tap various opportunities in the market from time to time.
IDFC Premier Equity commands a relatively low beta of 0.93 which implies that for every 1% rise or fall in the market, the fund will rise or fall by about 0.93%.
OUR VIEW:
IDFC Premier Equity has, over a period of time, proved itself to be one of the finest midcap funds of the industry. Not only has this fund performed stupendously in the rallies, but has also steered through the tides in the market downturn. Investors can definitely look at appropriating some percentage of their investments in IDFC Premier Equity, but with a long-term investment objective only.
