IDFC Classic Equity Fund

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IDFC Classic Equity Fund

IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index.

Performance

			YTD		1-Year		3-Year		5-Year		Since Inception
IDFC Classic Equity		0.93		26.61		6.30		1.01		11.65
BSE 200		1.52		17.31		6.00		1.99		12.98

All figures in % as on January 31, 2013; Returns above one-year in CAGR terms

The fund has outperformed its benchmark in the one- and three-year periods. It has underperformed in terms of five-year returns and returns since inception.

			2008		2009		2010		2011		2012
IDFC Classic Equity		-54.96		63.64		14.38		-26.79		37.26
BSE 200		-56.73		83.65		16.22		-26.95		30.98

All figures in %

Out of the last five calendar years, the fund has managed to outperform its benchmark only in 2008, 2011 and 2012. The fund underperformed substantially in 2009.

Investment philosophy and approach.The fund can invest across sectors and aims to invest in well-managed sustainable businesses whose shares are available at reasonable value.

Portfolio Characteristics

Number of equity holdings.Currently the fund has 32 stocks in its portfolio against the category median of 41. The average stock count has been 26 in 2008, 29 in 2009, 28 in 2010, 33 in 2011 and 2012. The portfolio has become more diversified gradually.

Sector concentration.The fund has a higher concentration in the top three, five and 10 sectors than the category median.

			Top 3		Top 5		Top 10
IDFC Classic Equity		37.07		55.39		74.87
Category Median		34.24		47.59		68.49

Company concentration.The fund has a lower concentration in the top three, five and 10companies compared to the category median.

			Top 3		Top 5		Top 10
IDFC Classic Equity		16.32		24.37		40.45
Category Median		18.41		28.03		45.52

Therefore, it can be said that the fund is concentrated at the top in terms of sector allocation and diversified at the top in terms of stock holdings.

Turnover ratio.The fund last disclosed its turnover ratio in March 2012. It was 123 per cent against the category median of 75 per cent.

Expense ratio.The fund's expense ratio is 2 per cent which is lower than the category median of 2.56 per cent.

Risk.In terms of risk measures such as standard deviation and beta (measured over last three years) the fund has a lower level of risk compared to the category median.

			Standard Deviation		Beta
IDFC Classic Equity		0.9126		0.7883
Category Median		0.9447		0.8078

Risk-adjusted returns. In terms of risk-adjusted returns like Sharpe and Treynor Ratio (measured over the last three years) the fund has lower risk-adjusted returns vis-à-vis the category median.

			Sharpe Ratio		Treynor Ratio
IDFC Classic Equity		0.0244		0.0153
Category Median		0.0283		0.0237

Cash allocation. Currently the fund has a cash allocation of 8.23 per cent against the category average of 4.34 per cent.

Portfolio Strategy: Last one year

The BSE 200 Index gave a return of 17.31 per cent in the last one year while the fund outperformed with a return of 26.61 per cent. In the last one year the fund has had an average allocation of 85 per cent to large-caps, 10 per cent to mid-caps and 4 per cent to cash.

	Sector		Feb-12 (%)		Jan-13(%)		Raised/lowered allocation (%)
Power Generation/Distribution				8.74		8.74
Bank Public		1.64		10.36		8.72
Cigarettes/Tobacco				6.81		6.81
Pharmaceuticals & Drugs		5.70		9.58		3.88
Film Production, Distribution & Entertainment				3.34		3.34
Finance – NBFC				2.76		2.76
Bank – Private		14.69		16.19		1.50
Engineering - Construction		2.22		2.93		0.71
TV Broadcasting & Software Production		2.93		3.64		0.71
IT - Software		15.31		10.52		-4.80

The fund raised its allocation to sectors like power generation/distribution, public banks, cigarettes and so on (see table above). It lowered its allocation to the IT-software sector.

Fund vs. Index – January 2013

	Sector		Fund (%)		BSE 200 (%)		Over/under weight (%age points)
Bank – Public		10.36		4.89		5.47
Power Generation/Distribution		8.74		3.57		5.17
Pharmaceuticals & Drugs		9.58		5.65		3.93
Film Production, Distribution & Entertainment		3.34				3.34
TV Broadcasting & Software Production		3.64		0.74		2.90
Bank – Private		16.19		14.04		2.15
Finance – NBFC		2.76		1.01		1.75
Cigarettes/Tobacco		6.81		6.24		0.57
IT - Software		10.52		11.01		-0.49
Engineering - Construction		2.93		3.65		-0.72

Currently the fund is overweight vis-à-vis its benchmark on sectors like public banks, power generation/distribution, pharmaceuticals, and so on (see table above).

	Company		Feb-12 (%)		Jan-13 (%)		Raised/lowered allocation (%age points)
ITC Ltd.				6.81		6.81
HDFC Bank Ltd.				4.88		4.88
Wockhardt Ltd.				4.41		4.41
PVR Ltd.				3.34		3.34
IndusInd Bank Ltd.				3.31		3.31
State Bank Of India		1.64		4.63		2.99
Zee Entertainment Enterprises Ltd.		2.93		3.64		0.71
ING Vysya Bank Ltd.		3.12		2.99		-0.13
ICICI Bank Ltd.		5.81		3.39		-2.42
HCL Technologies Ltd.		5.63		3.05		-2.58

Among its top holdings the fund increased its exposure to ITC, HDFC Bank, Wockhardt, PVR, IndusInd Bank, SBI and Zee Entertainment. It lowered its exposure to HCL Technologies, ICICI Bank and ING Vysya Bank.

Fund Manager. The fund is managed by AnkurArora and MeenakshiDawarwho have been at the helm since March 2012 and October 2011 respectively. This is the only fund currently managed by AnkurArora. The fund has shown better performance since he joined, making 2012 the best calendar year in terms of performance. This implies a good start by the fund manager.

Conclusion. Though the fund doesn't boast of a very consistent past track record, we have it in our positive watch-list because of the way it has come up in recent times due to the changes at the helm and increased diversification in the portfolio. It is also one of the better performing large-cap heavy funds in terms of SIP returns. However, at present there are better substitutes available for this fund.

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