IDFC Premier Equity: Hold

A stalwart in the mid-cap category of funds, IDFC Premier Equity has slipped down the ranking charts over the past year or so, even as peer funds climbed past it. Schemes such as Franklin Smaller Companies, Mirae Asset Emerging Bluechip, and Canara Robeco Emerging Equities roared to the top. IDFC Premier Equity’s one-year return of 27 per cent places it in the mid-quartile of funds in its category and on par with the category average of 27 per cent.

Though its returns pale in comparison with peers, IDFC Premier Equity has still beaten its benchmark BSE 500 index across timeframes by 10 to 17 percentage points. In containing downsides too, the fund has done better than most peers.

For example, in the sideways market that prevailed for most of 2013 until the recovery took root in August, the fund lost 14 per cent compared with the category’s 18 per cent.

But the fund’s current manager Kenneth Andrade, who has been at the helm since June 2006, will cease managing the fund after August.

Investors can retain units of the fund for now. In the interim, the fund will be overseen by Punam Sharma, who has been with the fund house for several years now. A track record of independent execution and delivery of results for the new fund manager remains to be established.

But IDFC Premier Equity’s current portfolio slant could hold it in good stead now.

Investors can thus keep an eye on its performance over the next few quarters.

Staying safe Part of IDFC Premier Equity’s trouble in the past year was its conservative and long-term stance which saw a slower shift from cash to equities in the recent market rally. In August 2013, equity exposure was at 78 per cent of the portfolio; while it did hold above 90 per cent until late 2014, holdings were cut again later. The fund now holds around 11 per cent of its portfolio in cash and debt. The fund also takes long-term and strategic calls on sectors and stays away from market favourites or overheated sectors. Banks, the usual favourite across funds, had been exited by January 2015 with stocks such as Kotak Mahindra Bank and Punjab National Bank moved out of the portfolio. Holding in software is similarly low at around 2 per cent of the portfolio.

Both sectors are slowing now and stock prices have corrected. Sectors such as automobiles, telecom, textiles, and cement have, instead, been stepped up over the past year. The fund has also been an early mover into sectors such as logistics.

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