Better than the Best
Time and again, this fund has proved its superiority. In the last ten years, it outperformed Sensex every single time. No other equity fund can claim match this feat. Every investor desires a fund that can deliver excellent returns, do that consistently year after year, and protect their wealth during the tough times. Surely, this is a tough ask, but HDFC Prudence has managed to do exactly that. Little surprise then, that this Rs 1,800-crore fund is the largest in its category and manages almost 38 per cent of the category assets.
The fund has protected the downside well. During the three-month period of May-July, it lost the least in the category. Its losses of 6.23 per cent were much lower than the category's loss of 11.43 per cent.
But how is that possible despite being low on cash, having over 60 per cent assets in equities (majority of which is in mid- and small-cap stocks)? Here is how. First, it lost less in May as many of its top holdings like Infosys, Crompton Greaves, RIL fell less than the market as a whole. In fact, one of its top holdings - Goetze (India) posted over 35 per cent return in May. Secondly, the fund went about buying stocks aggressively to increase the equity allocation from 60 to 75 per cent in June. A subsequent recovery in stock markets helped the fund stay in good shape.
The fund has the uncanny ability to spot the opportunities at the right time and making the most out of them. For example, the fund made an apt shift from the traditional large-cap portfolio to mid- and small-caps in late 2003. The sector calls have been brilliant. To quote one instance, when energy stocks were shooting up in 2002, the fund manager increased exposure to the sector from 4.3 per cent in January 2002 to 16.7 per cent by March.
On the debt side, the fund prefers a cautious approach and keeps bulk of its assets in quality corporate bonds and now commercial papers. With interest rates moving north, exposure to g-secs is on its way down.
The fund has changed its stated asset allocation pattern and accordingly, it has raised its equity allocation to 75 per cent. Expect that to be the norm from now on and be prepared for more volatility.
This article was originally published on October 01, 2006.
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