Investors in the Principal Emerging Bluechip Fund can hold on to their units. The fund has stupendously outperformed both its benchmark and the broader markets during rallies.

In the rally so far in this year, the fund has returned about 49 per cent, beating its benchmark, the CNX Midcap index, by 17 percentage points.

The broader markets, represented by the CNX 500, returned about 29 per cent in this period.

This performance has earned the fund a place among the top three in the diversified category.

As in 2012, the bull markets of 2009 saw the fund return a whopping 142 per cent, making it the top fund then.

But it has not been able to contain losses during market falls, 2011 being a case in point.

Considering this nature of the fund, its limited track record of about four years, and that there are more consistent and established mid-cap funds, new investments need not be made currently.

Performance

Launched in October 2008, Principal Emerging Bluechip has a mandate to achieve long-term capital appreciation by investing in equity and equity-related instruments of mid- and small-cap companies. Over one- and three-year periods, the fund sports a return of 37 per cent and 7.5 per cent, respectively, compared with the 21 per cent and the 4.5 per cent returns of the CNX Midcap index. While the one-year performance is noteworthy, the fund’s three-year record is tepid. Three out of four mid-cap funds have higher returns than Principal Emerging Bluechip in the three-year period.

Another aspect that mars the fund’s superior record in rallies is its inability to contain the downside.

In the 2011 fall, the fund lost about 35 per cent of its NAV, placing it among the worst performers.

Portfolio

Banks, consumer non-durables and pharma have predominantly been the top sector choices for the fund since inception.

It has 55 stocks in its latest portfolio, with the top five accounting for 18 per cent of the total holdings. Though it is a mid-cap fund, about half the stocks are large-caps (market cap of Rs 7,500 crore and above).

The fund sees limited churn, adopting, by and large, a buy-and-hold strategy. Recent additions include Satyam, UB Holdings, Jubilant Life Sciences and Oriental Bank of Commerce while CESC and McLeod Russel are recent exits.

The NAV of the growth option is Rs 32.53 a unit.

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