HDFC Long Term Advantage Fund (earlier called HDFC Taxplan 2000) is having the time of its life. The fund's outstanding performance over the long-term has seen its corpus increasing 12 times in the past two years.
Winning is a habit for this fund and 2004 was no exception. With a 46.47 per cent return, the fund ranked third in the category last year. The fund manager deserves a pat on his back for his ability to manage the first half of 2004 well when markets tanked and post smart gains in the bull run thereafter.
When the equity markets went sour in January 2004, the fund negotiated the period quite well-it lost 5.28 per cent as compared to the category average loss of 5.44 per cent. A low exposure to tech stocks of an average 5 per cent helped here. The next quarter was extraordinary. The fund survived the May stock market debacle and ended the second quarter of 2004 down only 0.25 per cent, while its average peers bled, losing an average 9.22 per cent. A high exposure to mid- and small-cap stocks (an average 88 per cent) helped the fund overlook the tough period. Consider this: in the second quarter, the Sensex was down over 14 per cent while the fund did better than the 5 per cent loss of the CNX Midcap Index. The fund increased exposure to tech stocks marginally in the quarter and gained from the rally in the sector. In the next two quarters too, the fund did well and emerged a winner.
Starting as a large-cap oriented fund, it soon realised the potential of mid- and small-cap stocks and increased weightage to these two types of stocks in August 2002. The strategy clicked as mid-cap stocks rallied in 2002. The fund ended the year as the hottest fund in the category.
After mastering the art of managing volatility that comes with smaller companies, it was time to enjoy the fruits and the fund did exactly that in 2003 and 2004. The exposure to mid- and small-caps increased to over 80 per cent and ended the two years as the third best performing fund in the category.
The only minor concern here is that the fund is yet to see a prolonged bear phase. Overall, HDFC Long Term Advantage Fund is a strong contender for all sorts of portfolio.
This article was originally published on April 18, 2005.
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