GEMGAZE

September 2019

The dip in the one-year performance of the diversified equity fund category as a whole has created a dent in the performance of all the GEMs. Inspite of this, all the GEMs from the 2018 GEMGAZE have performed reasonably well through thick and thin and figure prominently in the 2019 GEMGAZE too. 

Birla Sunlife Frontline Equity Fund Gem

Birla Sun Life Frontline Equity Fund has been one of the most consistent diversified equity funds since its inception in August 2002. This fund has generated significant alpha when compared to the category over a decade with a return of 11.79% as against the category average return of 9.81%. Its five-year return is 7.49% as against the category average return of 7.01%. Good performance resulted in assets expanding to over Rs 20,584 crore by August 2019. With 97.13% of the portfolio in equities, the fund has a bias for large cap growth oriented stocks. Large cap stocks account for nearly 85% of the portfolio value. In terms of sector allocation, the portfolio has a bias towards sectors like Banking and Finance, Energy and Technology which comprise about 62.02% of the portfolio value. In terms of company concentration the fund is fairly well diversified, the top 5 companies, HDFC Bank, ICICI Bank Infosys, State Bank of India and Reliance Industries, all Sensex heavyweights, account for only 32.91% of the portfolio value. The fund is well diversified with around 61 stocks in the portfolio. The expense ratio of the fund is 1.79% and turnover is 51%. The fund has been managed by Mahesh Patil, well-known for his deftly managed investment strategy since November 2005. But a steady management team manages the fund with style continuity. Birla Sun Life Frontline Equity Fund has built a strong reputation as a wealth creator for its investors.

HDFC Midcap Opportunities Fund Gem

A silent consistent performer over the years, the Rs. 20,944 crore HDFC Mid-Cap Opportunities Fund, launched in June 2007, has made its name among consistent performers in the mutual fund arena. This fund is an open ended scheme managed by star fund manager Chirag Setalvad since inception and Amar Kalkundrikar since January 2019. HDFC Mid-Cap Opportunities Fund earlier had a mandate to invest in a mix of mid-caps and small-cap stocks (97.06% at present). However, the aim now will be to predominantly build a portfolio of mid-cap companies (79.75% at present) that have reasonable growth prospects, sound financial strength, sustainable business models, and acceptable valuation that offer potential for capital appreciation. HDFC Mid-Cap Opportunities Fund holds a well-diversified equity portfolio with the top three sectors, Finance, Chemicals and Engineering constituting 43.67% of the portfolio. None of the holdings have an exposure of over 5% in the portfolio. Out of the 71 stocks in the portfolio, the top 10 holdings command an allocation of 31.19%. Over the past five years, HDFC Midcap Opportunities Fund has taken a lead over the benchmark right from the very beginning. The five-year and ten-year returns of the fund are 9.19% and 16.91% as against the category average of 8.51% and 10% respectively. In terms of long-term performance, HDFC Opportunities Fund has generated strong returns in the market rallies of the past and has been able to restrict losses in a bear market. The expense ratio is 1.71% and the turnover ratio is a meager 3%. 

ICICI Prudential Bluechip Fund (erstwhile ICICI Prudential Focused Bluechip Fund) Gem

Among mutual fund schemes that have singular focus on large-sized companies, the Rs. 21,125 crore ICICI Prudential Bluechip Fund has distinguished itself by consistently beating its benchmark and peers by a reasonably good margin. The fund has traditionally had a higher-than-category allocation to large caps (94.49% at present). Its mandate earlier called for a concentrated portfolio, with the stock picks drawn from the top 200 stocks by market cap. Post SEBI reclassification, the fund is repositioned as a pure large-cap fund. This will not materially change its risk or return profile, given that the market-cap range is practically the same. The 'focused' approach has been dropped from the mandate. It holds a well-diversified equity portfolio with the top three sectors, Finance, Energy and Technology constituting 56.64% of the portfolio. Out of the 52 stocks in the portfolio, the top 5 holdings command an allocation of 30.61%. This is in any case a positive, given that the fund's burgeoning size made a very compact portfolio difficult. The only limitation to assessing this fund is that despite its consistent show in the last eleven years, it has not seen a serious bear market since inception. In 2011 and in 2015, it managed to contain downside well relative to the market. The fund has been managed by Rajat Chandak since July 2017 and Anish Tawakley since September 2018. In the past ten- and five-year periods, the scheme has delivered 12.85% and 8.10% returns, while the category average has been 9.81% and 7.01% in the same period, respectively.  The expense ratio is 1.83% and the turnover ratio is 24%. Investors looking to invest in an ‘all-weather’ and ‘true to-its-label’ large cap portfolio can considr investing in this scheme. 

DSP Equity Opportunities Fund (erstwhile DSPBR Equity Opportunities Fund) Gem

A very steady performer in the multi-cap category, this Rs. 5157 crore fund, incorporated in May 2000, is a flexi-cap fund with no pre-defined market capitalisation limits. The fund had a bias towards large caps. But, in recent times, the fund has maintained a 52% plus large-cap exposure, with mid-cap stocks at about 48%. It holds a well-diversified equity portfolio with the top three sectors, Finance, Healthcare and Technology constituting 51.75% of the portfolio. Out of the 59 stocks in the portfolio, the top 5 holdings command an allocation of 26.69%.The expense ratio is1.96% and the turnover ratio is 132%. The fund has been managed by Rohit Singhania since June 2015. In the past ten- and five-year periods, the scheme has delivered 12.16% and 9.58% returns, while the category average, has been 11.37% and 8.06% in the same period, respectively. The scheme has been a consistent outperformer in recent years.