Consistency in outperformance against the benchmark over various market cycles has been the hallmark of this fund. Swapnil Suvarna feels over a long period the fund has the potential to generate decent returns due to its focus on large-caps, even though the fund has underperformed of late.
Launched on November 2005, Principal Large Cap Fund is benchmarked against BSE 100. The fund is being jointly managed by Rajat Jain and Anupam Tiwari. The fund focuses predominantly on building a portfolio of large companies in terms of market capitalization to generate returns with relative stability. The scheme document defines equities with market capitalization of greater than Rs 750 crore (the upper limit for inclusion of a company in CNX Midcap 200) as large-caps.
Since inception, the fund has registered a compounded annualized growth return (CAGR) of 18 per cent against its benchmark which recorded a CAGR of 13 per cent. Even though the scheme has undergone management changes and has changed its benchmark index, the key highlight of the fund is the consistency in outperformance over various market cycles. Overall, the fund has generated commendable alpha along with decent downside protection.
Period NAV BSE-100 Sensex Since Inception 18% 13% 13% 5-years 12% 8% 8% 3-year 11% 5% 5% 1-year -11% -10% -8% 6-month -12% -13% -13% Returns as on September 7, 2011. Returns less than 1 year are absolute, while greater than 1 year is annualised. Source: Accord Fintech
In line with its mandate, the fund invests over 80 percent of its assets in large-cap equities and the remaining is invested in attractively valued mid-caps with promising earnings growth. Due to its focus on mega-caps and promising large-caps, the fund portfolio is high on liquidity and quality, making it potentially less volatile then multi-cap funds.
Over the years the fund portfolio is spread across more than 15 sectors with software, pharmaceutical, banking/finance sector and energy accounting over 40 percent of its net assets. However, the fund has been underweight on sectors like auto ancillary since 2009 and has instead preferred automobiles space which has cost its performance to some extent during the brief March 2009 rally.
Though the fund has lagged in the short-term, the fund could generate reasonable gains due to its focus on large-caps over the long-term Moreover, its strategic exposure in the mid-cap space will help it benefit during the mid- and small-cap rally. Recommend the SIP route to your investors as the best way to invest in this fund.
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