Skip to main content

Mutual Fund Review: Principal Emerging Bluechip Fund

 

Principal Emerging Bluechip Fund boasts of a fine portfolio that can grow multi-fold over a period of time

 

THE year 2008 may well be reckoned as one of the most disappointing years for the equity markets globally. The year, however, provided an ideal platform to make fresh investments across sectors. Mutual fund schemes launched during this period and investors who dared to invest then are thus one happy lot today.


   Principal Emerging Bluechip can also be accredited for its excellent time of launch in October 2008. As the name suggests, the scheme is designed to invest in stocks of small and mid-cap companies which have portrayed potential to emerge as fine large-cap blue-chip companies of tomorrow. Given this objective, this scheme has ample scope to dig in and invest in value picks at opportunistic valuations.

PERFORMANCE:

Principal Emerging Bluechip Fund has had an overwhelming launch, not in terms of fresh collections or assets under management (AUM), but definitely in terms of performance. Thus, the past two months of 2008, after the scheme's launch, saw the fund returning more than 13% gains to its investors against the gains of about 2% by the scheme's benchmark index – the CNX Midcap.


   Thereafter, the year 2009 was one of the most exciting years for the fund as it returned over 147% gains in that year, taking its net asset value (NAV) to more than 28 per unit by the end of 2009. Just a year and two months ago, its NAV was quoting 10 per unit and did not have many takers. The scheme's stupendous performance is also evident from the fact that during this period CNX Midcap index returned about 99% while the returns of the broader market indices like the Sensex and the Nifty ranged from 76- 81%.


   After such a buoyant start, a lot was being expected from Principal Emerging Bluechip. In fact, this fund was being looked at one of the emerging diversified equity mutual fund schemes of the industry. Alas, however, this scheme slowed down its pace to such an extent thereafter, that it has dropped down in ranking from being an outperformer to just about an average performer.


   Market volatility of the year 2010 seems to have taken a heavy toll on the performance of Principal Emerging Bluechip which managed to return just about 20% gains against 19% returns by the CNX Midcap index. In the current year too, the scheme appears to be swinging with volatility and has returned a negative 14% against a negative 12% by the CNX Midcap so far.


   Thus, though the fund has proven its ability to outperform the markets in rallies, it still needs to prove its mettle in the downturn.


   As far as the overall returns are concerned, those who had invested in this fund in 2008 and 2009 are relatively better off as the scheme has retuned nearly 188% absolute returns since the time of its inception in October 2008. However, late entrants like those who have invested in this scheme in 2010 and thereafter are yet to earn some decent gains on their investments.

PORTFOLIO:

At an AUM of 316 crore, Principal Emerging Bluechip may not be termed as a very large fund. What is fascinating about this fund, however, is the manner in which its AUM has grown from less than 10 crore in October 2008 to the current levels.

 
   Given its investment objective of seeking emerging businesses across sectors, the scheme basically invests in small and mid size companies which relatively increase its risk quotient. Principal Emerging Bluechip can thus be assumed more volatile than the broader market.


   As far as the scheme's portfolio is concerned, with more than 60 equity holdings in its basket, it is extensively diversified and has limited its exposure per equity to less than 4%. This dilutes its risk per stock holding. Again, despite its high mid-cap exposure, the scheme has invested into some of the premium large-cap equity holdings like Asian Paints, Tata Motors, Cipla and HDFC. The scheme appears to churn its portfolio occasionally and most of its current holdings date back to mid 2009 to early 2010. Some of its most profitable holdings include Tata Motors, Bank of Baroda, Corporation Bank, Crompton Greaves and Mahindra Financial Services.


   As far as its profitability quotient is concerned, nearly 81% of the fund's equity portfolio currently earns it notional profit. The scheme has, however, booked notional losses in most of the investments made in 2010.

OUR VIEW:

Notwithstanding its outstanding competence to perform in the rallies, Principal Emerging Bluechip Fund is yet to prove its caliber amid volatility. The scheme, however, boasts of a fine portfolio which can grow multifold over a period of time. Investors with a fairly long-term horizon of at least five years and willing to take some risk may look at investing a small portion of their savings to Principal Emerging Blue-Chip.

 

Popular posts from this blog

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

What are the factors affect the changes in Interest Rate of Fixed Deposits?

  What are the factors affect the changes in rate of Fixed Deposits? Fixed Deposits are now considered to be a very old fashioned method of saving, but still attract many investors since they have guaranteed returns at the end of the tenure of the investment at a decent interest rate. There are various factors that affect the rates of interest for a Fixed Deposit. Policies of the Reserve Bank of India   - The several norms and restrictions posed by the Reserve Bank of India , in order to gain optimum control over credit and inflow and outflow of fund throughout the country. The repo rate changes, cash reserve ration tends to change and these changes affect the banking products like Fixed Deposits, loans etc. Recession   - When unemployment in a country crosses the benchmark set Recession hits, and slowly the country faces an economic slow movement, affecting the purchasing power of the people in the country, forcing the Reserve Bank of India to release more funds in the financial marke...

Myths about Exchange Traded Funds (ETFs)

1) ETFs Are Similar to Individual Stocks: Like MFs, ETF consist of an underlying portfolio of securities that's designed to follow a specific index or investment strategy. Hence, they are as diversified as various mutual funds. 2) ETFs Only Invest in Equity: Since they are listed on the exchange, the general belief is that ETF only consists of equity asset class. Globally, ETFs are available across asset classes – equity, debt, commodities, real estate and so on. In fact, over the past couple of years, India has also seen the emergence of Gold ETFs. 3) All ETFs Are Index Funds: ETF started as a fund which used to track indices and hence they were branded as index funds that are listed. However, ETFs have progressed rapidly and are no longer associated only with passive index funds. Globally, we have seen the launch of actively-managed ETFs. In India, also we recently saw the emer gence of fundamentally-weighted ETFs on Nifty, which busts the myth that ETFs are index funds and can...

REC Tax Free Bond Issue

Tax Saving Mutual Funds Online Current open Infra Bond Application form   Download REC Tax Free Bond Application Forms REC (Rural Electrification Corporation) is going to issue tax free bonds and the issue will open on March 6 2012 and will close on the 12th of March 2012 When you buy 80CCF infrastructure bonds, the amount you invest in those bonds get reduced from your taxable income but in these bonds that's not going to be the case. The interest on these bonds will be tax free and they are similar to the other tax free bonds like the HUDCO, NHAI and PFC issues. For the two of you interested in knowing this – these bonds are tax free under Section 10(15)(iv)(h) of the Income Tax Act. Now on to the issue itself and let's start with the high credit rating that the issue has got. The REC tax free bond issue has been given the highest rating by all issuers since the government owns the majority stake (66.8%) in REC, it has been consistently profit making,  this is a se...

Good Loan

Why Is It A Good Loan?: Loans against gold are cheaper and better than personal loans as the former are available at lower interest rates. In contrast, the interest rates on personal loans are not standardised and can vary from bank to bank. Also, a personal loan depends on a host of factors including, the borrower's salary, profession and the purpose for which the loan is being taken.      For instance, the interest rate on a personal loan of 5 lakh falls in a wide range of 15-30%. But loans against gold are available for as low as 11%. Secured borrowing such as a loan against gold, investments or property is cheaper because it is backed by some assets, which command a good value at any point of time. If the borrower defaults on the loan, the banks can liquidate the assets to settle the loan account.    Being a secured loan, the risk of default and credit losses is significantly lower in this loan compared to other forms of loan for personal use. Given the lower risk, gold loa...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now