Starting with a corpus of just Rs 56 lakh, the fund manages assets of Rs 262 crore today, and is the third largest ELSS. The fund has rewarded its investors handsomely. Till December 9 this year, the fund has earned 52.38 per cent, ahead of the category average return of 46.05 per cent.
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 sail through comfortably, as during this period the Sensex was down 14 per cent, while CNX Midcap Index dipped only 5 per cent.
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 their weightage in August 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 fund has marginally changed its focus now and rightly so. With equity markets at their all-time high and more volatility, it has hiked allocation to liquid large-cap and quality mid-cap stocks. It has also substantially cut down on small-caps. HDFC Long Term Advantage is a worthy choice for all long-term portfolios.
This article was originally published on December 12, 2005.
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