Principal Emerging Bluechip Fund: Invest in tomorrow’s Bluechip Companies

The Various Uses of Business Writing Services

The Principal Emerging Bluechip Fund is an equity-based mutual fund that primarily invests in stocks of mid-cap and large-cap companies that have shown a positive growth potential and sustainable business practices. The fund endeavours to invest in companies that will become tomorrow’s bluechip companies and market leaders. The fund’s primary objective is to provide investors with long-term capital appreciation and income by investing in a mid-cap and large-cap company across economic sectors.

Performance

The performance of the Principal Emerging Bluechip Fund is measured against its benchmark, the NIFTY Large Midcap 250 TRI. The fund is ranked among the top funds in its category for returns over a 3-year and 5-year investment horizon. The fund does not perform well over short periods of time but outperforms the benchmark on larger investment horizons of 3 years and 5 years. As this fund primarily invests in the mid-cap and large-cap segments of the market it has the potential to provide its investors with superior returns when compared to large-cap bias mutual funds. The fund also mitigates volatility by avoiding large investments in small-cap segments of the market. The annualized returns against its benchmark and category have been provided below:

Trailing Returns3-Months6-Months1-Year3-Years5-Years
Fund-9.28-8.76-10.8314.5923.34
NIFTY Large Midcap 250 TRI-8.43-5.68-5.7713.2917.05
Category-7.28-6.3-8.2911.0716.51

Investment Strategy

The Principal Emerging Bluechip Fund invests the majority of its corpus in large-cap and mid-cap companies with a view to providing investors with relatively stable, superior returns. This fund is, according to its mandate, allots a minimum of 35% of the corpus to mid-cap and large-cap companies. As this is an open-ended fund it can dynamically change the composition of investments to adapt to prevailing market conditions. The fund manager adopts a conservative approach to investing and carefully chooses companies that have been consistently performing well. The presence of good financial opportunities can cause the fund to invest in derivatives. The fund also has a nominal investment in debt and other stable money market instruments to provide it with a level of stability, this component may be increased to a maximum of 35% during highly volatile market cycles.

Asset Allocation

READ  Boosting Wellbeing: An Employer's Mini-Guide

The Principal Emerging Bluechip Fund is a mid-cap/large-cap bias mutual fund. The fund is primarily equity-based, allots most of the assets to large-cap and mid-cap companies with a view to provide investors superior returns over a long investment horizon of at least 5 years. The fund also invests a nominal amount in debt and other stable money market instruments to provide the fund a level of stability. The present asset allocation of the fund has been provided in the chart below.

Equity95.33
Cash & cash Eq.4.31

Portfolio

The Principal Emerging Bluechip Fund has a highly diversified portfolio within the mid-cap and large-cap sectors of the market. The fund presently invests heavily in the Finance, Engineering, Services and FMCG sectors of the economy. As this fund is open-ended in nature it can change the composition of its investments based on the prevailing market conditions. The present sectoral allocation of the fund against its category has been provided below.

Top 10 holdings

CompanySectorValue%Assets
HDFC BankBanking/Finance40.242.76
ICICI BankBanking/Finance37.392.33
BritanniaFood & Beverage53.282.31
AIA EngineeringEngineering40.852.11
Bajaj FinanceBanking/Finance34.162.08
RelianceOil & Gas44.532.01
TCSTechnology38.841.94
Exide IndAutomotive31.821.77
Torrent PharmaPharmaceuticals31.661.65
Eicher MotorsAutomotive45.011.64

Risk Profile

The Principal Emerging Bluechip Fund is an equity-based mutual fund that primarily invests in large-cap and mid-cap companies. Even though the large-cap segment is considered relatively stable to the mid-cap and small-cap sectors, the fund is exposed to market volatility which can cause the investor to incur a loss in capital.

Liquidity Risk

The various transfer procedures, settlement periods and trading volumes can affect the time taken to redeem units, which affects the liquidity of the investment

READ  How To Budget For Your First House

Debt

Even though investments in debt are considered low-risk investments, there are still some risks associated with investment in debt.

Credit Risk

The risk that an issuer will default on the payment of fixed income security is called credit risk.

Interest Rate Risk

Interest rate changes drastically affect the value of long-term debt instruments, therefore, affecting the Net Asset Value (NAV) of the fund.

Risk Mitigation

Concentration Risk

The Principal Emerging Bluechip Fund avoids concentration risks by diversifying its portfolio across all sectors of the economy. If one sector of the economy is performing poorly it will not have too much of an effect on the fund, as only a small portion of the corpus is allocated to a single sector.

Liquidity Risk

The fund endeavours to maintain a balance between its assets and liabilities to make sure that payments during redemption of units are done in a timely manner.

Interest Rate Risk

The fund tries to time the maturity of the scheme along with expected changes in interest rates to mitigate the effect of interest rate changes on the fund.

Credit Risk

The fund selects debt instruments from highly ranked companies who are rated by SEBI registered credit rating agencies, to mitigate the risk of the issuer not paying the fixed income on investments.

Fund Managers

Mr Dhimant Shah

Mr Dhimant Shah has been the fund manager of Principal Emerging Bluechip Fund since June 2011. Prior to joining as Fund Manager with Principal Mutual Fund Mr. Shah worked with HSBC AMC Ltd., Reliance Mutual Fund, ASK Raymond James Securities Pvt. Ltd., and IL&FS AMC.

Leave a Reply

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.