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HDFC Growth Fund: Need to watch for some more time
Wed, Mar 26, 2014
Source : Citrus Interactive

HDFC Growth Fund is an open ended equity diversified scheme, which aims to generate long term capital appreciation by predominantly investing in equity and equity related instruments.  As of December 31, 2013 the average asset under management under this scheme stood at Rs. 1019 crores. This fund was launched in September 2000 and is benchmarked against S&P BSE SENSEX.

Fund Performance

Although the fund has a good track record and history over last 10 years and since inception, it has underperformed in comparison to its peers and benchmark in the last one and three years. The fund performance has greatly suffered in the last one year and now is in the 4th quartile over last 1 year and 3 year time horizon.

Scheme Name

YTD

1-Year

3-Years

Since Inception

HDFC Growth Fund (HGF)

1.82

3.96

4.31

18.06

S&P BSE SENSEX

2.85

12.46

6.19

12.02

Category Average

2.52

12.65

7.57

 

Rank

106/153

147/150

114/143

 

Figures are in % as on February 28, 2014; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

The performance of the fund has been mixed over last 5 calendar years with fund outperforming the benchmark returns in CY 2010, 2011 and 2012. The fund underperformed the category average in 3 out of the last 5 years pushing the fund’s performance into below average category over 5 years time horizon.

 

2009

2010

2011

2012

2013

HDFC Growth Fund (HGF)

75.26

27.71

-21.24

27.83

-1.4

S&P BSE SENSEX

81.03

17.43

-24.64

25.7

8.98

Category Average

87.52

19.31

-24.32

34.29

4.67

Rank

90/127

16/135

36/142

111/146

133/150

 Portfolio Characteristics

Sector Concentration: In view of the sector concentration the fund is fairly diversified and is in line with its diversified category median.

 

Top 3

Top 5

Top 10

HDFC Growth Fund (HGF)

45.04

61.36

82.83

Category Median

44.99

60.26

81.32

Company Concentration: Its concentration in top three, five and 10 companies in its portfolio is higher than the median for the category.

 

Top 3

Top 5

Top 10

HDFC Growth Fund (HGF)

25.51

37.06

57.63

Category Median

19.33

29.05

46.73

 

Risk Measures:  The fund’s risk level measured in terms of standard deviation and beta over the last one year is much higher than the category median.           

 

Standard Deviation

Beta

HDFC Growth Fund (HGF)

1.0178

0.8916

Category Median

0.9479

0.8147

 Figures as on February 28, 2014

Risk adjusted Returns: Higher risk and below par return of the fund over last year has resulted in lower risk adjusted returns (Sharpe Ratio & Treynor Ratio) as compared to the category median.

 

Sharpe

Treynor

HDFC Growth Fund (HGF)

0.0092

0.0098

Category Median

0.0232

0.0239

 Figures as on February 28, 2014

Portfolio

Number of equity holdings:  As of February 28, 2014 the fund holds 36 stocks in its portfolio which is lower than the category median of 41 for the diversified equity category.

Its average portfolio holdings since 2009 is fairly diversified around 40 stocks which are in line with the category median. The top 5 sectors in the portfolio had an allocation of 60% which include Bank, Software, Petroleum Products, Pharmaceuticals and Consumer Non Durables. The top 5 holdings accounts for 37%, comprising Infosys Ltd., ICICI Bank Ltd., ITC Ltd., Reliance and Housing Development Finance Corporation Ltd.

The fund’s exposure to cyclical stocks currently is 63%, followed by services with 18% and defensives around 16%. Cyclical stocks had average exposure of 66% (range of 62 – 70%), defensives at 17% (14-20%) and services 15% (10-18%) over the last 12 months. The fund does not believe in keeping high cash which has been reflected in the yearly average and current cash holdings of 1.6% and 2.5% respectively.

Process

HDFC Growth Fund is an open ended growth scheme having asset allocation of 80-100% in equities and upto 20% in Debt/Money Market instruments. The focus is on long term investing in businesses with superior growth prospects and good management at a reasonable price. As per Scheme Information Document, the Investment Strategy is expected to be a function of extensive research and based on data and reasoning, rather than current fashion and emotion.

The fund has a low portfolio turnover ratio of 23.49% over the last year. The fund’s expense ratio is 2.13% which is lower than the category median of 2.56%. 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.

Fund Manager

HDFC Growth Fund is being managed by Mr. Srinivas Rao Ravuri (40 yrs) since April 2006. He has experience of over 16 years in equity research and fund management in Indian markets. Before joining HDFC Mutual Fund in 2004, he has worked with Motilal Oswal Securities Ltd. and Edelweiss Capital Ltd. as Research Analyst. He is also the Fund/Co Fund Manager for HDFC Focussed Large Cap, HDFC Infrastructure Fund & HDFC Rajiv Gandhi Equity Savings Scheme.

View

Although the fund has a good track record over very long term of 10 years and since inception, the performance of the fund over last one/three years is not encouraging. The fund had a mixed history of performance over last 5 years. There have been occasional sparks in the performance in the last one year but it’s not enough to give you full conviction. Hence one may watch the performance of the fund before making an allocation to this fund. Currently, there are better substitutes available for this fund.

 
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