The Hindu Business Line : HDFC Core and Satellite: Hold

Unit holders can retain their holdings in HDFC Core and Satellite. The fund’s performance has seen a slowdown, trailing the benchmark BSE 200 for two consecutive years. During this period, the assets under management, too, have come down, as the fund has witnessed steady outflows.

If HDFC Core and Satellite is a significant holding in your portfolio, it may be better to switch to HDFC Top 200 or HDFC Equity fund that deliver better returns on a risk-adjusted basis. Any fresh investment can be put on hold as well, until the fund’s performance sees a marked improvement.

Suitability: The fund splits its portfolio into Core and Satellite portions. The “Core” portion is invested in large caps, whereas the “Satellite” portion is invested in predominantly small- and mid-cap companies that offer potentially higher returns. The risk profile of the fund is similar to that of diversified fund.

Performance: The fund’s NAV has witnessed a growth of 27 per cent and trailed the category average as well as the benchmark BSE 200 by good margin. In the past twenty-four months, it has trailed the benchmark by more than 60 per cent of the times. This is despite the fact that the fund was invested in the right sectors such as capital goods, banking and power.

Poor timing of investments could partly explain the underperformance. For instance, the fund has only recently stepped up exposure to the banking sector, which has also been under pressure in recent trading sessions. Also, the fund, until recently, held significant exposures in the software sector, which has been a major underperformer.

The fund has, however, contained the downfall better than the benchmark in the on-going market correction. This despite having substantially higher exposures to small and mid-caps than the BSE-200. Performance will, however, continue to hinge on its stock and sector selection as the fund has a tendency to take concentrated bets and maintain a compact portfolio.

Portfolio overview: In the latest portfolio, capital goods, banks and power together cornered close to one half of the assets. The top 10 stocks account for about 57 per cent of the assets.

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