It has thus acquired a track-record that justifies a place at the core of any long-term equity portfolio.
This is an unusual mid-cap fund. It offers a rare combination of below average risk and above average return grades. Surprisingly, though the fund keeps bulk of its assets in mid- and small-cap stocks, it's standard deviation (a measure of risk) remain below that of an average peer. Unlike some of its counterparts, it always maintains decent exposure to larger companies. Though this means the returns here won't be as flashy as that of some of its aggressive peers, this strategy works well when the tide turns against the market. This was on display in the first half of 2004 when portfolios laden with mid-cap stocks went for a toss--HDFC Capital Builder lost around 6 per cent as against over 13 per cent loss of an average peer. Investors have recognised the fund's ability--the assets have increased more than ten folds in the last two years.
The fund's portfolio underwent crucial changes after coming under the HDFC banner. While mid-cap stocks continued to dominate, small-caps started to play a greater role. Though this resulted into higher volatility, the fund still managed to keep it below that of an average peer through better diversification-a concentrated portfolio spread over 20 to 25 stocks under Zurich made way for a well-diversified portfolio spread over 40 to 50 stocks. The change proved fruitful as the fund ended 2004 as one of the top five diversified equity funds with returns of 47.71 per cent. Last year, investors here had to compromise with average returns due to the fund's underperformance in the second and last quarter. Overall, the fund looks good for an investor seeking to benefit from mid-cap stocks but not willing to take too much risk.
…a bit of history
HDFC Capital Builder began its life as a close-end fund by the name of Centurion Quantum Fund under the 20th Century Mutual Fund in January 1994. In 1998, Zurich India Mutual Fund acquired the AMC and converted it to an open-end fund by the name of Zurich India Capital Builder. The second major shift came in mid-2003 when HDFC Mutual Fund acquired Zurich India Mutual Fund. Since then, it's thriving under the new AMC by the name of HDFC Capital Builder.