IDFC Strategic Sector (50:50) Equity is relatively new and needs to be watched for some more time to assess its performance
A diversified equity mutual fund scheme usually seeks to distribute investments across various sectors and market capitalisation. A sector specific equity mutual fund scheme, on the other hand, seeks to optimise returns by concentrating its synergies on one particular sector.IDFC Asset Management Company has attempted to club both these concepts by launching a product that not only seeks to diversify across sectors but also lays special emphasis on one particular sector.
IDFC Strategic Sector (50:50) Equity scheme invests up to 50% of its assets in
one chosen sector of the season and the balance 50% across various other equity sectors.So, has this experiment of launching a product, which is both sectoral and diversified in structure, worked for IDFC? And is 'Strategic Sector (50:50) Equity' indeed worth your money? Let's check out.
PERFORMANCE:
Launched in October 2008, IDFC Strategic Sector (50:50) Equity is a relatively new scheme, yet to complete three years of existence. It thus lacks a strong performance track record, imperative for any MF scheme to gain investor confidence. Its performance in the past twoand-a-half years has shown a remarkable improvement and the fund has moved from being an underperformer to an average performer over this period. In 2009, it clocked gains of about 52%, But the Sensex and the Nifty returned about 81% and 76%, respectively, in that year while the category of large-cap equity schemes, on an average, returned about 71% then. IDFC Strategic Sector (50:50) Equity has been placed under the category of large-cap equity schemes given its high exposure to large-cap scrips.One of the reasons for the fund's underperformance in 2009 can be attributed to the choice of its major sector then — oil and gas.
It was thus not surprising to see this fund change gears and move to financial services as its major sector towards the end of 2009.In 2010, the fund gained 23%, surpassing the 17-18% returns by the major bourses as well as the average returns of about 17% by the category of large-cap equity funds. A high exposure to the banking sector definitely seems to have worked for this scheme with the BSE Bankex rising by more than 33% last year.In the current year, so far, the scheme's net asset value dropped 10%.
PORTFOLIO:
AUM of IDFC Strategic Sector have grown from 15 crore at the time of launch in October 2008 to about 37 crore today. The fund has restricted itself to investing only in wellrecognised large-cap companies that fairly reduces its risk quotient. Even within its major sector, which is banking and financial services at present, the fund has limited its investment to some of the top banking and financial services scrips, including Axis Bank, HDFC Bank, ICICI Bank, Yes Bank, BoB, PNB and Shriram Transport Finance Company. The financial Services sector account for about 35% of the fund's portfolio. Its other important sectoral investments include technology and energy. While the fund has a decent mix of sectors, it has limited its options when it comes to choosing stocks for its portfolio. Investors may thus find its portfolio a bit concentrated with just about 20-22 scrips. This focus is, however, justified by the fund's extremely small asset base of less than 40 crore.
OUR VIEW:
The fund is an experimental venture, trying to club the best of both themes - sectoral as well as diversified. This scheme, however, carries an inherent risk as far as picking up the right sector at the appropriate time is concerned. So far, this scheme has put a decent show, making a remarkable recovery after a lack lus-tre start. The fund, however, is relatively new and needs to be watched for some more time to assess whether the dual theme strategy will really work for the investor.
