The Hindu Business Line : Principal Global swears by Philips, Cummins

PRINCIPAL Global Opportunities, which invests in international equities, has placed big bets on Philips, P&G, Ricoh, Nestle and Cummins, which are currently its five top holdings. Together, these stocks constitute well over 30 per cent of its portfolio.

The fund provided a return of 0.4 per cent last month, underperforming the benchmark, MSCI World Index, by 0.6 per cent. It had only a limited exposure to infotech and no exposure to energy, two of the best performing sectors in May. However, stock selection in Europe "positively impacted the portfolio performance by eight basis points", a commentary by the fund manager has mentioned. On the other hand, US and Japanese stocks negatively impacted the performance by 55 basis points and 13 basis points respectively.

The portfolio is spread over a number of sectors, the bigger allocations being consumer electronics, industrial machinery, household products and pharmaceuticals. The fund is nearly fully invested, with cash and other liquid asset accounting for less than 4.5 per cent. Principal Global, it may be mentioned, has logged 2.08 per cent since inception (end-March, 2004) compared to a negative 1.03 per cent recorded by MSCI World Index. In India, the Nifty went down by 14.38 per cent during this period.

The largest holding, Philips, has benefited from "strong worldwide demand in consumer electronics and pick-up from Asia," Mr Rajat Jain, the Fund Manager for Principal Global, has observed. P&G, also an overweight company, has recorded improved profitability following "pricing power in selective products".

The targets for regional allocations are 35 per cent for the US, 40 per cent for Europe and 25 per cent for Japan. The fund has sought to minimize region and sector exposures relative to the index, it is claimed.