In its near nine year history, IDFC Premier Equity has had a fabulous run over both the bull and bear phase of the market. Adding to its aura is the manner in which this fund is run; from time to time this fund accepts fresh lump sum investments. However, investors can continue to invest through SIPs. We analysed the fund through its 106 month history and figured that it was open for lump sum investments for just 41 months, that is less than 40 per cent of the time.
The fund recently opened up for fresh lump sum investments on May 27, 2014. This is only the 7th time in its history, which prompted us to ask Kenneth Andrade, head investments, IDFC Mutual Fund how this strategy has helped in the fund's performance? “We haven't seen very large outflows from this fund. And, I think closure of the fund doesn't allow lumpy capital to come into the scheme because investors can only come through SIPs and STPs,” he explains.
Although this fund falls in the Value Research mid- and small-cap fund category, its stated objective is to invest in stocks across market capitalisation, which it does. Stock selection has played a big role in the fund's performance, which makes it the best performing fund between Jan 1, 2006 and Jun 24, 2014. In this period, this fund posted an annualised 22.05 per cent returns. “The most important factor that has helped the fund is that the companies that we have picked up had brilliant execution capabilities,” says Andrade.
Moreover, the fund manager follows a buy and hold strategy, and invests in companies that have favourable valuations. The portfolio has 15 stocks that have been there for more than three years. “When we first bought Kaveri Seeds their profitability was ₹13 crore, this year it will cross ₹250 crore. So I would say that, stock picking has worked and we always try and identify parts of the economies which will grow,” explains Andrade. Further, explaining the investment philosophy, Andrade says that markets get polarized into opportunities.
|Open Date||Closing Date||Period for lump sum investment|
|Sep 5, 2005||Sep 16, 2005||Initial offer period|
|June 2, 2006||July 21, 2007||13 months and 24 days|
|Oct 1, 2007||Jan 15, 2008||3 months and 16 days|
|Apr 15, 2008||Oct 14, 2009||18 months and 7 days|
|Jan 27, 2010||Fen 27, 2010||1 month and 1 day|
|Mar 31, 2011||May 16, 2011||1 month and 16 days|
|Mar 1, 2012||May 31, 2012||3 months and 1 day|
|May 27, 2014||—||—|
With the markets on the rise, is there an opportunity to ride that the fund hopes to cash on? “Yes there are enough opportunities in the market even at this point of time across the sectors,” says Andrade. He feels if the economy bottoms at 4-5 per cent of GDP growth and there emerges a stable policy framework; the economy will automatically turn upwards and that is where he expects to find opportunity.
He further adds, “During the 2005-07 period there was rush for infrastructure and real estate stocks and again in 2009-12 when everyone went after defensive sectors. At times markets polarize into certain opportunities which over the period can become large. So we try and identify the part of the economy that will polarize lot of capital and once we have been aligned with that we try and built portfolio around it.”
The strategy to maintain steady inflows through SIPs and STPs does seem to have worked. The unit capital in this fund has steadily increased and was three times what it was eight and a half years ago as on March 31, 2014. The assets have grown by almost 93 per cent since its inception to ₹3,717.77 crore as on March 31, 2014. The fund's portfolio has been constructed based on the execution capabilities of the individual entrepreneurs, that is companies in which it invests according to Andrade. This is also the reason why on many occasions, the fund's price earnings multiples has been expensive compared to peers. By investing in the right company, Andrade has managed to make this fund stand by its performance, which it manages to do.