IDFC Premier Equity Plan A:An outstanding outperformer

There’s no arguing with the numbers. In its history, IDFC Premier Equity Plan A has underperformed the category average in just two quarters (out of 14).

In 2007, it trounced the competition with a return of 110 per cent (category average: 64%). In the bear phase running from January 8, 2008 to March 9, 2009, it shed 54 per cent (category average: -64%). Its 3-year trailing returns of 30.45 per cent (July 31, 2009) places it streets ahead of the competition.

Hats off to fund manager Kenneth Andrade who boldly rides his bets. Little wonder that allocation to Services touched 44.74 per cent (May 2007) or FMCG accounted for 21.66 per cent (March 2009). Neither does he shirk from taking contrarian stands; his bias towards Services ever since inception and his restraint from going heavy on Energy, despite the sector gaining impressively, are cases in point.

In 2007 he did not jump into Metals. Ironically, the BSE Metal index delivered 121.47 per cent that year and yet the fund returned 46 per cent higher than the category average.

But Andrade is unsure if he should be branded a contrarian. “This fund attempts to capture shifts in the business environment with regard to new business opportunities, technologies and trends. We try to position ourselves ahead of the chain. It may or may not pay off but we must have sufficient reason to believe in what we are investing in,” he says.

With a focus on small companies, Andrade has an interest in keeping the fund size small. Hence it was shut for fresh investments during periods in 2006 and 2007. He maintains a tight portfolio spread across 26 stocks (1 year average) whose allocations don’t cross 7 per cent, barring Shree Renuka Sugars.

Ever since Andrade took over the fund in February 2007, he has maintained a high debt allocation which peaked at 25.53 per cent (June 2008) while cash holding was at 12.24 per cent (May 2008). Due to these high allocations he missed out on the latest rally to some extent with a return of 91 per cent, as against the category average of 104 per cent (March 9 – July 31, 2009). “The companies in this segment are not very liquid. We don’t want to be caught on the wrong foot, so have to ensure ample liquidity for redemptions, so that we do not disturb the entire portfolio,” he says. In a nutshell, a compelling pick.

Intelligent churners

DSPBR EQUITY

Consistency is the virtue of this fund. Though benchmarked against the Nifty, it’s not a pure large-cap holding. In the past, it had actively changed its complexion from being a large-cap to a mid-cap holding, depending on market conditions. In its long history, the large-cap allocation has wavered from 89 per cent to 39 per cent. But, ever since Shah took over in 2006, he aims for a 50 per cent large-cap tilt. The outcome is a rigorously diversified offering. Allocation to the top three sectors remains below the category average. Gone are the days when the portfolio held just 22 stocks, with the top 10 holdings accounting for nearly 75 per cent. Under Shah’s management, single-stock allocation has never crossed five per cent, barring a few large-caps. Out of the 87 stocks in its portfolio, 50 have an allocation of less than one per cent. Shah actively churns his portfolio. Shah handled the market rally in 2007 and the market crash in 2008 very well. But, when the market began to rise from March 9, 2009, onwards, he was caught unaware. It took him a while to lower cash allocation and neither did he go heavy on construction, metals or financials, which boomed during that time. As a result, the fund lagged. “With a defensive portfolio, we could not catch the market turnaround; hence we underperformed from March to June. Then we repositioned our portfolio to look at growth.” It worked. In 2009, he outperformed the category average yet again. The charm of this multi-cap player lies in the fact that it has impressed in all market conditions.

RELIANCE REGULAR SAVINGS EQUITY

In its short history, this one has made its mark. Its annual and trailing returns are amazing. Omprakash took over in November 2007 and wasted no time in changing the complexion of the portfolio. The fund has excelled since. Exposure to construction shot up to 28 per cent, with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects. Exposure to engineering was yanked up (18.5 per cent), while financial services lost its prime slot (dropped to 6.69 per cent) and auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average, 25.7 per cent). When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But, even its high cash allocations could not cushion the fall. The fund manager attempts to capitalise on valuation differentials between mid- and large-cap stocks, which at times can result in aggressive churning. This fund started off as a large-cap fund but resembled a pure mid-cap offering by the end of 2007. Since January 2009, it took on a distinct large-cap tilt, which it maintains till date. Had Omprakash opted for a greater mid-cap exposure, he might have delivered even higher than 102 per cent (2009). Right now, he is adopting a more cautious approach, a wait-and-watch strategy to see how interest rates pan out and how inflation is dealt with. As assets have risen, so have the number of stocks. And, while you may see strong sector bets, he plays it safe with individual stocks.

UTI DIVIDEND YIELD

This fund has successfully navigated through good and bad times. The mandate demands an investment of at least 65 per cent of the portfolio in equity shares that have a high dividend yield at the time of investment. A look at the track record makes one wonder whether the fund manager follows this principle diligently. Its impressive performance in 2007 was because Kulkarni hopped on to the energy and metals bandwagon by re-entering Tata Power and adding RIL, SAIL and Tata Steel. That year, the BSE Power, BSE Oil & Gas, and BSE Metals all delivered handsomely. The objective is best suited to those who want decent returns with good downside protection. Its fall in 2008 was less than that of the Sensex, as well as the category averages of the multi-cap and dividend yield categories. Of course, allocation to debt and cash also contributed to cushioning the fall. Come 2009 and the fund faltered, because Kulkarni began to seriously up the equity allocation only from June 2009 onwards. But, what has always worked for this fund is smart bottom-up stock picking and sector allocation. By doing that, Kulkarni managed to marginally outperform the Sensex and the other two categories in 2009 as well. She gives credit to “ good stock picking in IT, consumer, engineering and metal sectors”. The intrinsic nature of this portfolio is to pick up good dividend yield stocks, which bring support on the downside. However, using a multi-cap strategy, she has put to rest the notion that dividend yield funds can only impress during market downturns.

Dividend in Just 7 months: Bharti-Axa Equity Fund

The first offer by Bharti AXA Investment Managers (BAIM) in diversified equity space through its BA Equity Fund, an open-end equity growth fund whose investment performance is benchmarked against S&P CNX Nifty index, has managed to pleasantly surprise its investors by announcing a dividend payout today, just seven months from launch.

While BAIM, a joint venture between Bharti Ventures Ltd, AXA Investment Managers and AXA Asia Pacific Holdings, is itself a fairly new asset management company, it is looking to move aggressively in the space to make up for lost time against well-entrenched competitors.

The record date for BA Equity Fund, launched in September 2008, has been fixed as 29th May 2009 and all purchases on or before this date will be eligible for the dividend.

According to Sandeep Dasgupta, CEO, Bharti AXA Investment Managers, “Stringent risk control norms have been the pivot in our investment strategy. It is our stated philosophy that we book profits and share them with the investors.”

 

	Quantum Of Dividend
Bharti AXA Equity Fund* (Plan/ Option)	Re. per unit	% of face value	Record Date	NAV as of 21st May, 09 (Rs.)
Regular Plan – Quarterly Dividend	0.50	5%	May 29,2009	14.18
Regular Plan – Regular Dividend	1.00	10%		14.18
Eco Plan – Quarterly Dividend	0.50	5%		14.21
Eco Plan -  Regular Dividend	1.00	10%		14.21
Institutional Plan – Quarterly Dividend	0.50	5%		-
Institutional Plan - Regular Dividend	1.00	10%		-

* as of May 21, 2009. Face value: Rs 10 per unit.

 

Record date : May 29, 2009

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