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IDFC Imperial Equity Fund has been a laggard among its large-cap peers. Its less-than-13 per cent annualised return since inception in 2006 places it among the bottom quartile of large-cap funds. Over the last one, three and five-year periods too, the fund ranks in the bottom quartile of the category. Its 45 per cent return over the last one-year period has just about kept pace with the benchmark Nifty.
Over three and five-year periods, though, the fund has lagged the benchmark by about two percentage points.
Its track record on an annual rolling return basis also does not inspire confidence with the fund outperforming the benchmark less than 30 per cent of the time.
A few factors have worked against IDFC Imperial Equity Fund.
Conservative approachOne, a relatively conservative investment approach means that all the stocks in its portfolio are large-caps.
Other funds in the category do add some mid-cap exposure to give a kicker to returns.
This may be the reason why, unlike peers, the fund has not been able to latch on to multi-bagger stocks in the ongoing market rally. This factor could continue to be a disadvantage if this bull market continues, as such markets usually create wealth across the market cap range. Owning a multicap portfolio can deliver better returns for investors during such phases.
The fund also seems to have been late in picking the big winners and letting go of the losers.
For instance, last year, while it did add cyclical stocks such as Maruti Suzuki and Axis Bank which almost doubled, it did so only from May-June 2014; a fair part of the market rally was already done. Also, while the fund pared its holdings in stocks such as Reliance Industries which have declined last year, it did so in fits and starts.
Wrong choicesNext, wrong choices have not helped. For instance, in the last one year, the fund picked up stake in stocks such as Tata Steel which have fallen; it pared stakes in stocks such as HDFC Bank which rallied smartly.
When the market rally started early last year, the fund took cash and debt exposure to the tune of more than 10 per cent of its portfolio, thus not allowing it to participate fully in the upswing.
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