A Good Balancing Act - IDFC Small & Mid-Cap Fund
6/20/2011 6:34 PM Monday
Where is the market headed? This is the question of the hour! The market direction for every investor on D-Street has become a mystery. This has impacted volumes which have made the markets lacklustre and listless. This is evident in the performance of the BSE Sensex which on a YTD basis has put up a very subdued performance, falling 10.92% (till June 10). Having said that, one surprising and also an ironic fact is that despite such volatility observed in the large-cap genre, the small and mid-cap funds have comparatively done well.
On a YTD basis, the average NAV of the small and mid-cap funds’ category fell by 8.75% while the funds with the bias for larger capitalisation stocks fell by 9.91%. And what’s more, IDFC Small & Mid-Cap Fund has managed to contain losses better as compared to its category, the large-cap funds, the BSE Sensex and the BSE Small-Cap Index too wherein its NAV fell by 4.82% on a YTD basis. Launched in 2008, the fund has managed to stay ahead of its peers over the longer and shorter time horizons. In the three-year period the fund has managed to be at the second position, beating the category returns by a massive 1544 bps. Meanwhile, in the one and two-year periods, the fund has outpaced the category returns by 485 and 797 bps.
However, the fund has not consistently or always made it to being in the top five in terms of its returns and thus high-risk investors can take limited exposure to the fund through SIP. One more reason for choosing this fund is that Kenneth Andrade is the captain of this ship (fund manager) since its inception. This makes the fund a reliable bet considering that he brings stability, consistency and continuity to the fund’s investment approach, style, and to some extent, performance. At IDFC, Kenneth manages many funds that have done well as compared to their peers, of which IDFC Premier Equity is one of the most successful funds in the small and mid-cap categories.
Another reason that makes this fund a good bet is that it has man-aged the risk well, considering the fact that it flaunts the best Sharpe Ratio (risk-adjusted returns) in the category that stands at 0.77. Talking about the portfolio, at the end of May the top three sectors and top five stocks contributed a little over 23% each for the equity portfolio. Around 10.81% of the net assets of the fund have been invested in defensive sectors like FMCG. This helps the fund to dilute the risk arising out of the market-cap concentration to some extent. Such astute portfolio risk-balancing act makes it one of those funds that takes a lesser grade of risk and provides a higher grade of returns as compared to its peers.
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