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Substantial Overlap

Some of the top holdings of HDFC Top 200 & HDFC Equity will remain common. Invest in any one of them…

I want your opinion on HDFC Equity and HDFC Top 200. I have been tracking and investing in both these funds and it seems both of them are same, maintaining the same portfolio by investing in the same stocks with the same fund manager.
-Anil Sahu

Based on the November 2012 portfolio, there is a 75 per cent portfolio overlap between HDFC Top 200 and HDFC Equity. According to our fund classification, both HDFC Top 200 and HDFC Equity are large- and mid-cap funds. In October 2012, we had asked Prashant Jain, Executive Director & Chief Investment Officer, HDFC Asset Management Company, who manages both the funds, on the overlaps. According to him, in large-cap funds, some portfolio overlap is inevitable. He further said, "After all, there are only 50 or so large-cap companies. However, what people typically do is glance though the top-10 holdings of different funds, see very familiar and quite a few common names in them and conclude that the portfolios are similar." Some of the top holdings in these two funds are indeed common and will remain so. The allocations could however be different and the non top-10 holdings may be different. A 20-40 per cent difference in portfolio composition is sufficient to make a reasonable difference to performance, particularly over long periods. For instance, an annual 2 per cent difference over 10 years will make a big difference to wealth. We feel as an investor, you can invest in any of the two funds for the long-term with periodic reviews.

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