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Principal Emerging BlueChip Fund - Strong MidCap Contender.
Fri, Nov 13, 2015
Source : Khyati Shah, Citrus Interactive

Principal Emerging Bluechip Fund is an open-end diversified equity mid cap fund.The primary objective of the scheme is to achieve long-term capital appreciation by investing in equity and equity related instruments of Mid Cap and Small Cap companies. The fund was launched in November 2008 and is benchmarked against the CNX Midcap Index.The fund has an AUM of Rs.510 crore as on October 31, 2015 which is gone up by 13 crore as compared to the last month September 30, 2015 (497 crore).


Performance

Principal Emerging BlueChip Fund has an excellent performance track record of consistently outperforming its benchmark index and the equity diversified category average across all time frames as shown from the table given below except for 6 months and YTD returns where it has underperformed its benchmark index. Its performance since inception has been better that its benchmark by over 11.40 percentage points.  And in the time horizon of 2 and 3 years it has clearly been in the top quartile of its peer-set.

Scheme Name

YTD

6 Months

1 Year

2 Years

3 Years

Since Inception

Principal Emerging BlueChip Fund (G)

5.12

2.38

13.86

43.58

30.06

31.65

CNX Midcap

5.2

4.33

11.8

32.6

19.49

20.26

Category Average

2.99

1.74

7.94

29.04

21.06

NA

Rank

45/158

68/161

35/158

19/148

16/145

NA

Figures are in % as on October 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that this fund has beaten its category average in four of the last five years (excluding in 2011). While the fund was amongst the top performers in 2012 and 2014 when there was a recovery in markets it was also one of the worst performers in 2011 during a downturn. The fund has beaten its benchmark in four of the last five years (excluding in 2011).

Scheme Name

2010

2011

2012

2013

2014

Principal Emerging BlueChip Fund (G)

19.74

-34.73

55.03

5.84

80.18

CNX Midcap

19.16

-31

39.16

-5.1

55.91

Category Average

19.64

-23.95

34.05

5.43

53.99

Rank

58/131

134/138

2/142

74/146

16/149

All figures in %

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken higher risk compared to the category.

 

Standard Deviation

Beta

Principal Emerging BlueChip Fund (G)

1.05

0.87

Category Median

0.95

0.88

 

Risk-adjusted Returns: In terms of measures of risk such as Treynorand Sharpe (measured over last three years), the fund has taken slightly higher risk compared to the category median.

 

Treynor

Sharpe

Principal Emerging BlueChip Fund (G)

0.11

0.10

Category Median

0.07

0.07

 

Processes:

Principal Emerging Bluechip Fund mainly invests in mid cap stocks and the market cap range for a quarter is determined taking into account the midcap range of the benchmark index at the end of the preceding calendar quarter. The fund may also invest in small cap and large cap stocks to tap market opportunities and maintain liquidity.

The fund can allocate 65% to 95% of its portfolio in equity and equity related instruments of midcap companies, 5% to 15% allocation in small cap companies and upto 30% in large cap equity and equity related instruments. The fund may also investment upto 30% of its portfolio in Debt and Money Market instruments and fixed income securities.

The fund’s expense ratio is 2.20% which is lower than the category average of 2.38%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Portfolio Characteristics:

Sector concentration: The fund concentration in the Top 3, Top 5 and Top 10 sectors is much lower than the category median.

 

Top 3

Top 5

Top 10

Principal Emerging BlueChip Fund (G)

27.69

35.07

51.42

Category Median

37.35

50.17

71.33

 

Company concentration: The company concentration of the fund in the Top 3, Top 5 and Top 10 companies is much lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

Principal Emerging BlueChip Fund (G)

10.38

16.27

28.82

Category Median

19.3

27.86

44.67

 

Number of equity holdings: The fund currently holds 62 stocks in its portfolio (Sept 30, 2015), which is much higher than the median stock count for the diversified-equity category, which currently stands at 46. Thus, based on equity count the fund runs a diversified portfolio compared to its peer set. Since Inception the fund has always had a diversified portfolio with the number of equity holdings averaging 57.86.

The top 5 sectors in the portfolio had an allocation of 35.07% which is lower than the category average of 49.61%. The top 5 sector include Automobiles- Trucks/Lcv, Batteries, Consumer Food, Bank – Private and Pharmaceuticals and Drugs.

The fund’s exposure to cyclical stocks currently is 75.77% followed by Defensives with 16.14% and Services with 6.16%. The Top five holding are Eicher Motors Ltd., Amara Raja Batteries Ltd., Britannia Industries Ltd., IndusInd Bank Ltd. and AurobindoPharma Ltd.

In the last three months the fund has brought stocks of Bajaj Finance Ltd., Gabriel India Ltd., HDFC Bank Ltd., L&T Finance Holdings Ltd., NatcoPharma Ltd., Navin Fluorine International Ltd., SKS Microfinance Ltd., TheRamco Cements Ltd. and VST Tillers Tractors Ltd.

Whereas stocks ofArvind Infrastructure Ltd., Ashok Leyland Ltd., Axis Bank Ltd., Century Textiles & Industries Ltd.,DB Corp Ltd., Insecticides (India) Ltd., JK Cement Ltd., Kotak Mahindra Bank Ltd., Sun Pharmaceutical Industries Ltd. and  Supreme Infrastructure India Ltd. has been dropped from the portfolio.

Thus, based on criteria such as equity count, sector concentration and company concentration, one can conclude that the fund runs a well-diversified portfolio.

 

Fund Manager

Dhimant Shah is a Senior Fund Manager – Equity.Mr. Shah is a B.Com (H) and Chartered Accountant with more than 18 years of experience in the stock markets. Prior to joining Principal Mutual Fund, Mr. Shah was working as a Fund Manager in HSBC Asset Management (India) Private Ltd. He has also worked with Reliance Capital Asset Management Ltd. (PMS), ASK Raymond James Securities Pvt. Limited andILandFS Asset Management Co. Pvt. Ltd (now known as UTI Asset Management Company Ltd).

 

View

Principal Emerging Bluechip Fund was launched in the depths of the financial crisis in November 2008 and has given excellent returns to its investors since its inception. The fund has an AUM of Rs.497 crore as on September 30, 2015. Investors should note that midcap funds are intrinsically more risky than large cap funds, but they have the potential to give higher returns in the long term. This fund is an excellent choice for investor with a slightly higher risk appetite and wanting to ride the rally of the market with a well-managed fund.

 
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