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IDFC Focused Equity: Turnaround Story
Sun, Aug 13, 2017
Source : Yash Jashnani, Citrus Interactive

IDFC Focused Equity Fund is an open ended large cap equity diversified fund. The investment objective of the scheme is to generate long term capital appreciation by investing in a concentrated portfolio of equity and equity related instruments of upto 30 companies. The fund has assets under management (AUM) of Rs.166 crore which has increased by Rs 58 crore compared to June 2016

Performance

The fund has beaten its benchmark in all the time periods. It has also beaten the equity diversified category average in year-to-date (YTD), 6 months and 1 year but has underperformed in the 3 year and 5 year period. The fund’s performance has improved in the recent periods – making it the best performing fund in the equity diversified category in the last 6 months.

Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

IDFC Focused Equity Fund

39.59

32.37

32.93

13.94

15.38

12.05

Nifty 50

23.1

17.71

16.65

9.27

14.01

11.99

Category Average

25.7

18.75

20.83

16.61

20.47

NA

Rank

3/155

1/156

6/155

93/146

121/138

NA

Figures are in % as on 31st July 2017; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

In terms of the calendar year returns the fund has beaten its benchmark in 2014 time period but has underperformed in 2012, 2013, 2015 and 2016. It has underperformed in all time periods compared to its category average as shown in the table below.

Scheme Name

2012

2013

2014

2015

2016

IDFC Focused Equity Fund

20.79

2.85

32.23

-4.77

1.78

Nifty 50

27.7

6.76

31.39

-4.06

3.01

Category Average

33.94

5.16

54.32

3.61

4.63

Rank

131/136

103/138

133/141

139/149

117/155

All return figures in %

 

Risk: In terms of measures of risk such as Standard deviation (measured over the last 3 years) the fund has taken lower risk compared to its category median and in terms of Beta (measured over the last 3 years) the fund has taken higher risk as compared to its category median.

 

Standard Deviation

Beta

IDFC Focused Equity Fund

0.9

0.97

Category Median

0.95

0.92

 

Risk-Adjusted Return: In terms of Sharpe and Treynor Ratio (measured over the last 3 years) the fund has provided lower risk-adjusted returns than the category median.

 

Treynor

Sharpe

IDFC Focused Equity Fund

0.04

0.05

Category Median

0.05

0.06

 

Portfolio

Sector concentration: The fund’s concentration in the top 3, 5 and 10 sectors is higher than the category median – which is expected as it’s a concentrated strategy.

 

Top 3

Top 5

Top 10

IDFC Focused Equity Fund

38.66

48.72

70.6

Category Median

32.57

43.7

63.68

All figures in % as on 30th June 2017

 

Company concentration: The fund’s Concentration in the top 3 and top 5 sectors is lower than the category median and the fund’s concentration in top 10 companies is higher than the category median.

 

Top 3

Top 5

Top 10

IDFC Focused Equity Fund

14.63

23.25

43.86

Category Median

17.06

25.17

41.48

All figures in % as on 30th June 2017

 

Number of Equity Holdings: The fund currently holds 27 stocks in its portfolio (30th June, 2017), which is lower than the median stock count of the equity diversified category, which currently stands at 46. In the last 5 years the equity holding averages to 25.

 

Cash Equivalent:        

Its cash equivalent for June is 2.76%. The average cash allocation for the last five years is 2.9%. Its maximum allocation to cash over the last two years is 5.53% in January 2015 and lowest was 1.44% in July 2015. The fund overall maintains low allocation to cash.

 

Portfolio Characteristics:

The top 5 sectors include Bank – Private, Finance – NBFC, Pharmaceuticals & Drugs, Engineering - Industrial Equipments and IT – Software.

In the last 6 months the fund has bought Avenue Supermarts Ltd., Central Depository Services (India) Ltd., Dollar Industries Ltd., Eicher Motors Ltd., Kajaria Ceramics Ltd., Minda Industries Ltd., Petronet LNG Ltd., RBL Bank Ltd., Sagar Cements Ltd. and The Lakshmi Vilas Bank Ltd.

Stocks of Asian Paints Ltd., GAIL (India) Ltd., HCL Technologies Ltd., Hero MotoCorp Ltd., Hindustan Petroleum Corporation Ltd., Hindustan Unilever Ltd., ICICI Bank Ltd., ITC Ltd., Larsen & Toubro Ltd., Procter & Gamble Hygiene & Health Care Ltd., State Bank Of India, Sun Pharmaceutical Industries Ltd., Torrent Pharmaceuticals Ltd., Zee Entertainment Enterprises Ltd. and Shree Cement Ltd. have been dropped from its portfolio and stocks of BSE Ltd., Carbogen Amcis (India) Ltd., Dishman Carbogen Amcis Ltd., Exide Industries Ltd., Hindalco Industries Ltd., Bajaj Finance Ltd. and VRL Logistics Ltd. have been bought and sold in the last 6 months.

 

Process

IDFC Focused Equity is a concentrated portfolio of upto 30 stocks with the flexibility to invest across sectors and across market cap. Given that the scheme will be concentrated to a maximum of 30 stocks, the portfolio will look at investing in carefully researched quality companies that have the ability to generate above average return on capital and superior prospects.

The fund invests in businesses that are growth oriented and have superior capital efficiencies. The fund also focuses on businesses that have the potential to turn around driven by change in the internal or external environment.

The fund manager continues to remain positive on private sector financials, consumer discretionary (including Auto) and select industrials. The fund is underweight on IT and Pharma and has exposure only through select stocks.

The scheme would invest 65-100% in equity and equity related Instruments. It would also invest 0-35% in debt and money market Instruments and it would invest 0-35% in securitized debt instruments.

 

Fund Manager

Sumit Agarwal

Mr Sumit Agarwal is the Vice President – Fund Management at IDFC Asset Management Company Limited. Mr. Agarwal has an experience spanning over 12 years in Finance Industry.

He has been associated with IDFC AMC since October 2016. Prior to joining IDFC AMC, he was associated with Mirae Asset Mutual Fund, as Fund Manager – Equities (November 2010 – September 2016). Prior to that he was associated with Axis Capital (Erstwhile ENAM Securities) as Vice President – Research Analyst (February 2008 to November 2010) and prior to the same with JP Morgan India Services Pvt. Ltd. as Team Leader & Research Analyst – Investment Banking (June 2006 to February 2008).

Mr. Agarwal holds Post Graduate Diploma in Management (PGDM) in Finance, Chartered Financial Analyst (USA), Company Secretary affiliated with Institute of Company Secretaries of India and Bachelor Degree in Commerce.


Our View

The fund performance has witnessed a turnaround since the new fund manager took charge of the fund. As the stock holdings will be limited to 30 stocks, it is a large cap portfolio with concentration risks. It can be considered for the large cap allocation of your portfolio.

 

 

 
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