The Hindu Business Line : HDFC Core & Satellite Fund: Invest

As the fund has specific allocations to large- and mid-caps, investors who want such defined exposures can consider this fund, as long as it does not form part of the core portfolio.

Exposure can be considered in HDFC Core & Satellite Fund. We had recommended the fund in October 2005, just a year after its launch, though such assessment is usually made only after the fund has notched up a three-year track record.

The reputation of the fund-house, its blend of large- and mid-cap stocks and compact portfolio had inspired confidence. In the year since that recommendation, the fund has generated a return of 66 per cent. It is now larger, with an asset base of over Rs 750 crore.

It has, however, comfortably outpaced its benchmark BSE-200 by 6 percentage points during this period. While the fund did suffer during the market correction, it has recovered in recent months and remains in the upper quartile of rankings over a one-year period.

Suitability: The fund splits its portfolio into "Core" and "Satellite" holdings. The Core portion predominantly comprises large-cap stocks and accounts for 60-80 per cent of the portfolio.

The rest is invested in "Satellite" stocks that consist of small-caps with a market cap of less than Rs 2,500 crore.

The fund's risk profile is similar to that of a typical diversified fund. While several funds sport a blend of large- and mid-cap stocks, the fund has specific caps in both categories. Investors who want defined exposures to large- and mid-caps can consider investments in this fund.

However, it need not form part of your core portfolio, but can be opted for after investing in such top-performing funds as HDFC Top 200 and Franklin Bluechip that deliver better returns on a risk-adjusted basis.

Performance: The fund's performance is similar to its peers from the same fund house. It has delivered better returns than HDFC Top 200 for one-year. Among the indices, BSE-200 is one of the tough benchmarks to beat.

Since inception, this fund has comfortably outpaced it benchmark in 16 of the past 24 months. The fund slacked a bit for the past six months and generated a negative return. However, the latest portfolio appears to have potential.

Portfolio Profile: The concentrated portfolio consists of 27 stocks.

The fund appears to bet on the top ten, which account for 60 per cent of the assets. The top three sectors corner 40 per cent of the portfolio. The fund strictly goes by the mandate and the exposure to small-caps, with less than Rs 2,500 crore, remains less than 30 per cent. Software continues to dominate the sector allocation. The fund moved out of the banking sector after the May peak. Since then, the sector has started to generate better returns. This might be the one reason for the fund's underperformance in the past six months.

Fund facts: HDFC Core & Satellite was launched in September 2004 and is managed by Mr Dhawal Mehta. The minimum investment is Rs 5,000 and entry load is 2.25 per cent. The assets under management are Rs 769 crore. The NAV per unit is Rs.25.3

More Stories on : Mutual Funds | Recommendation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page