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Mutual Fund Review: IDFC PREMIER EQUITY PLAN

This fund seeks to invest in companies that may not have scale at the time of investment, but have the potential to become market leaders.

In periods when the fund manager perceives market valuations to be dangerously stretched, lump sum subscriptions are stopped and only investments made via systematic investment plans (SIPs) are accepted.

The fund has outpaced its benchmark, the BSE 500, during bull phases and contained the downside during corrections. In 2008, the fund quickly moved a fourth of its assets to debt, checking the fall.

It invests in small-cap and mediumsized businesses with good long-term potential, at cheap valuations. Though the portfolio sports a mid-cap bias, the fund picks stocks that are leaders in their sectors and have attractive valuations. The fund manager does not shirk from contrarian stands or bold sector bets.

Fast moving consumer goods (FMCG), services and chemicals are the top three sectors. The portfolio comprises of 25 stocks. Mid-caps form 60 per cent of the portfolio and 30 per cent is smallcaps. The top 10 stocks account for over 40 per cent of the assets.

The fund returned 32 per cent in 2010 with a 24 per cent five-year annualised return (as on January 31, 2011). But with the focus on small companies, strong top sector bets and a fairly tight portfolio, there is an inherent strong risk taken to deliver that performance.

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