When most of the funds find it difficult to handle rising asset size and see a dip in performance, HDFC Top 200 shows no signs of tiring. This year, in the first quarter when the category on an average lost 6.01 per cent, the fund limited its fall to 4.62 per cent. Till August 31, 2011, the fund had limited its YTD loss to more or less the category average.
With Rs 10692 crore (September 30, 2011) of assets under management, it is not only the biggest equity fund in India but is also the second best performer in its category over the 10-year period ended September 30, 2011.
Continuity at helm and skilled management has helped the fund build a competitive track record over the long-term. Jain has been managing the fund since 2002. Although the fund's performance in 2007 got investors worried, he silenced critics with a 94.46 per cent return in 2009. In the subsequent year it was the fourth best performer in its category with a return of 25.05 per cent.
The fund's investment universe comprises of any company that is a part of the BSE 200 or qualifies to be a part of that index, including initial public offerings. The fund targets around 60 per cent of the portfolio in the BSE 200 stocks. As per its June 2011 portfolio, the fund was holding close to 92 per cent of its assets in BSE 200 stocks. Having said that, the portfolio of the fund is actively managed and the fund can be underweight or over weight on any stock compared to its benchmark.
This fund has protected investor's wealth during market meltdowns. In 2008, the fund's loss of 45.35 per cent was around 11 per cent less than the BSE 200 and around 8 per cent lower than the category average. And what's noteworthy is that Jain did it without resorting to aggressive cash calls. The cash and debt exposure of the fund averaged around 3.23 per cent in 2008. The increased exposure to less hit sectors like FMCG and Healthcare came to the aid of the fund.
As the fund has grown in size, concentration of the top three sectors has increased from around 41.61 per cent (August 2008) to 51 per cent at present. However, the number of stocks is pretty significant at 64 and the concentration of the top five has dipped to around 28 per cent over the past year; in the past it was known to cross 40 per cent at times.
A quality portfolio and a manager who sticks to his conviction, irrespective of whoever else is playing the momentum game, is a mark of this fund. Investors may fret occasionally but Jain has a knack of rewarding investors who stick with the fund.