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IDFC Premier Equity Fund Review

, December 19, 2012, 0 Comments

Premier Equity Fund is an unrestricted diversified equity scheme that invests across market caps following a ‘buy and hold strategy’. The scheme has been designed to invest in new promising companies at cheap valuations and then holding on to them till they grow to offer huge rewards. The strategy has been successful so far with 21% annualized returns since launch, which means that Rs. 1000 invested in September 2005 would be around Rs. 4000 as on date (i.e four times in 7 years).
Second in the series, let’s explore the leading performer in Small & Mid Cap Fund Category. Yes, we are talking about IDFC Premier Equity Fund. Launched in 2005, the scheme has justified its name through ‘Premier’ returns across market cycles.
The credit for success goes to the fund manager, Kenneth Andrade, who took over in June 2006. His ability of shortlisting emerging themes by studying macro-economic scenario and picking fundamentally sound stocks at early stages has been responsible for the scheme’s success.

While the scheme is open-ended, it has a unique philosophy to limit fresh inflows. The fund protects the existing investors’ interest by restricting lump-sum investments. While the SIP mode is open across the year for investors; lump sum investment window opens at intervals and that too for a limited period only. So far it has opened only 5 times since inception – the recent being in May 2012.

On the portfolio side, the scheme generally never goes overboard on any particular sector. The exposure to any sector is limited to less than 10% with top five sectors at present being banks (9.55%), consumer foods (9.16%), brew/distilleries (7.25%), garments and fabrics (6.78%) and Logistics solution providers (6.57%). In case of volatility or market correction, the fund manager increases the cash position up to 20% as done in late 2011. Currently, the scheme has equity exposure of more than 90%.

Till date the fund has rewarded investors during bull-runs and shown tremendous resilience during bear-sentiments. On risk side, of the total 10 quarters when Mid & Small Cap Category has been in red, the scheme registered a lower fall than the category in nine. On the returns side, the scheme has outperformed the benchmark index as well as category average returns by a huge margin over 2, 3 and 5 year period as can be seen in the below table.


The fund definitely has the key-man risk with success largely depending on Andrade’s skills. However, despite the scheme belonging to Mid & Small Cap Category, it is less vulnerable to risk on account of judicious portfolio selection. Aggressive and moderately aggressive investors can consider this fund with a target investment period of at least 3-5 years. You can also consider SIP route for longer timeframe to ride out market volatility and average costs.