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.
