This superb offering has kept up its torrid pace. Despite being a balanced offering, the fund has outperformed the Sensex and Nifty in 13 years (out of 16) of its existence.
With returns that match that of an all-equity diversified fund, it’s not surprising that the fund is managing the highest assets in its category. As on March 2011, the fund had Rs 5,808 crore under its management, equivalent to almost half of the category assets.
The returns delivered by the fund are a result of its aggressive equity allocation. With the equity exposure of HDFC Prudence being capped at 75 per cent, it largely remains close to the upper limit and has averaged around 74 per cent since January 2007. It has gone up to a maximum of 76 per cent and has never gone below 71 per cent.
The aggression even extends to the composition of the portfolio in terms of market cap allocation. Although recently it has increased exposure to large-cap stocks to around half of fund’s assets, it historically has been largely tilted towards mid- and small-cap stocks since 2004. Even during the market meltdown of 2008, its average mid- and small-cap stock allocation was a bold three fourth of its equity portfolio.
Jain has no problem moving against the herd, as reflected in his sector selection and even in his stock picks. In 2007, when other fund managers were betting on Real Estate and Energy, he preferred casting his bets elsewhere. In 2007, exposure to Autos stood at around 8 per cent while allocation to Energy was lowered to around 3 per cent by December. BSE Auto delivered 3 per cent while BSE Oil & Gas and BSE Power delivered 115.25 per cent and 122 per cent, respectively.
Naturally, he was punished for it. But in 2008, he managed to curtail the fund’s fall to the average and bounced back with a vengeance in 2009.
Currently, there are 15 stocks in which less than 10 other funds are invested in. Eleven of these stocks have been in the fund’s portfolio for at least two years; Savita Oil Technologies (since 2005) being a case in point. On the flip side, some of the picks popular with its peers are conspicuously absent here. For instance, it was only in February 2011 that the fund added Reliance Industries to its portfolio while prior to that it had invested in it for a brief period (3 months) in January 2009.
On the debt side, the fund largely invests in debentures of the Financial Services sector. It also invests in GOI Securities and the allocation to it has recently risen to around 11 per cent. Though the fund sports a diversified equity portfolio of 80 stocks with none having an allocation of more than 5 per cent, it is still an aggressive offering.