IDFC Premier Equity

Kenneth Andrade Head - Investment , IDFC Asset Management Company

AUM Rs 3448.20 .............................................................. AS ON DECEMBER 31, 2013
NAV Rs 46.83 ...................................................................AS ON MARCH 28, 2014

With a corpus of Rs 3448 crore, and managed by Kenneth Andrade, IDFC Premier Equity Fund has been one of the sought after fund by investors. The corpus of the funds in the span of last eight years has grown at a CAGR of 35 per cent. Let us take a look at the rationale which has prompted us to recommend this fund to our readers.

The first and the foremost reason that comes to our mind is that, the fund has been able to post better performance over both bull and bear phases that the Indian markets have witnessed. The fund manager runs with investments in companies that ride future trends and have strong cultural and societal trends backing them and are available at cheap valuations. The discipline to restrict fund inflows to maintain a manageable corpus has helped this fund during times of market indifference. Unchanged fund management is additional bonus in an otherwise risky category, which makes it a good choice for a tactical investment.

The scheme aims to generate long-term capital growth from an actively managed portfolio of predominantly equity and equity related instruments. It would invest in small and medium size businesses with good long term potential, which is available at cheap valuations. In last one year the fund has generated return of 28.29 per cent, while its benchmark has generated return of 16.17 per cent. The outperformance stands at a staggering 1211 basis points. Not only this, if you had invested Rs 1000 per month for the past three years, then the incremental value of Rs 36000 investment now stands at Rs 44572.

The stocks that have generated major gains for the fund includes names like Kavveri Seed Company, Page Industries, Va Tech Wabag, CONCOR and Godfrey Phillips India to name a few. The investment of the fund is well diversified. The top five sectors comprise more than 66.73 per cent of the portfolio in a fund. The top five sectors are Services (20.08 per cent), FMCG (19.19 per cent), Engineering (11.05 per cent), Textiles (9.43 per cent) and Chemicals (6.98 per cent).

The approach of the fund has been to select companies which had cash flow positive businesses and companies with low debt. The fund manager is of the view that the markets and economy is positioned and its investing style should work for an absolute return over the next two years. The fund continues to favour the domestic demand environment. At present, the fund is invested around 93.33 per cent in equities, while 6.25 per cent is allocated in debt and a mere 0.25 per cent the fund is holding in cash.

The improved performance of the fund has not come at the cost of risk taking. This statement can be substantiated by looking at the sharp ratio which stands at 0.47. The alpha of the fund stands at 6.95, which represents the excess return that the fund has generated at a given level of risk.

The fund can be an ideal candidate to form a part of the mutual fund portfolio of risk taking as well as risk adverse investors. However, an SIP route for investors seems to be the best way to invest DS in this fund scheme.