This fund is not as aggressive as some of the other mid-cap funds. While it invests a bulk of its assets in mid-cap stocks, it also allocates a significant part of its portfolio to large-caps. Therefore, it has not been a top performer, but quite a consistent one. These characteristics justify it as a core holding in a portfolio.
It began as a close-ended fund by the name of Centurion Quantum Fund under the 20th Century Mutual Fund. When Zurich India Mutual Fund acquired the AMC, it converted it into an open-ended fund called Zurich India Capital Builder. When HDFC Mutual Fund acquired Zurich India Mutual Fund, the fund was christened HDFC Capital Builder.
While it was far from a top performer with a ranking of 35 (out of 58 funds) in 2001, it climbed its way to 26 (out of 60) in 2002, to 18 (out of 71) in 2003 to the number five slot (out of 82) in 2004. Last year the fund delivered average returns and slipped to 46th place (out of 101). In mid-2003, when the fund came under the HDFC banner, the portfolio underwent numerous changes. This is what propelled the fund to shoot up in performance the following year. Mid-caps continued to dominate but small-caps too began to play a more prominent role, adding to returns and volatility. While the portfolio was limited to around 25 stocks, once it came to HDFC it was increased to around 40 to 50 stocks.
Though a mid-cap fund, it maintains a fair exposure to large-caps too. While this may subdue its returns, it also provided a cushion when the markets had tanked in the past. For instance, in the first half of 2004 when mid-caps went for a toss, HDFC Capital Builder lost around 6 per cent as against over 13 per cent of an average peer.
This fund is a good bet for those wanting to invest in mid-caps but not willing to take too much of a risk.
This article was originally published on October 24, 2006.
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