Did you know that even investments can be exciting? Typically, asset classes or investment avenues that have hit a purple patch make the grade as exciting ones. Especially, the ones that have gone from obscurity to prominence in a short time span. They are written about in the media and instantly recommended by investment advisors. For instance, a fund that has delivered a trail-blazing performance and is perched at the top of the rankings. Even providers of financial services enjoy their fifteen minutes of fame; say a fund house that holds the largest asset size in the industry. Don't get me wrong. There is nothing wrong with an asset class, an investment avenue or a financial service provider being lauded and discussed, because it has delivered. In fact, it's only to be expected.
The trouble starts when one reads too much into the 'exciting' bit and makes investment decisions based solely on the same. Also, since most of the fanfare can be attributed to a recent showing, it is difficult to distinguish a 'flash in the pan' from a 'sustainable' performance. And for serious investors, the latter is certainly a more important evaluation parameter.
Then there are funds which don't qualify as exciting ones. Make no mistake, that's not the same as being non-performers. On the contrary, these can be funds that go about playing their part to perfection, but in an understated manner. They often deliver with enviable levels of consistency. Their performance over longer time periods and across parameters can be impressive. Despite this, there is never a frenzy surrounding them. It is not uncommon for such funds to be labelled as 'boring'.
Sadly, most investors fail to realise that in the context of investing, boring can be good. This is because, boring translates into predictability. And predictability means fewer unpleasant surprises. If you are building an investment portfolio to achieve certain objectives, boring funds of the aforementioned variety should account for a lion's share of the portfolio. The fact that a fund isn't in the limelight or isn't perceived as exciting is no reflection on its prowess. A competent performer stays the same irrespective of the attention it garners. HDFC Top 200 Fund (HT2F) is one fund that falls in the category of underrated achievers.
Originally an offering from Zurich India Mutual Fund, the fund became a part of HDFC Mutual Fund subsequent to the former's takeover in 2003. A diversified equity fund, HT2F's investment proposition is quite simple. It largely invests in stocks of companies featuring in the BSE 200 index. An interesting aspect of the fund is that it combines the active and passive styles of investing. It holds around 60% of its portfolio in line with the BSE 200 index. The fund has also benefited from the presence of its fund manager, Prashant Jain (Executive Director & CIO-HDFC Mutual Fund). Incidentally, Prashant Jain was earlier associated with Zurich India Mutual Fund. The fund's long-standing association with the fund manager has served it well.
Now for the performance. For a fund that has been in existence for well over a decade (inception in 1996), HT2F's track record is impressive to say the least. As on July 14, 2009, over the 3-Yr and 5-Yr periods, it had delivered 17.5% CAGR and 31.2% CAGR respectively; the corresponding figures for BSE 200 were 9.9% CAGR and 21.8% CAGR. Over the last 12 months, the fund posted a growth of 22.3% vis-à-vis just 3.1% for its benchmark. HT2F's NAV rose by 21.6% CAGR over a 10-Yr period as compared to 13.8% for BSE 200. And that is no mean achievement!
Any analyst worth his salt will agree that a fund's mettle is truly tested during a downturn. In recent times, after peaking in January 2008, domestic stock markets went into a downward spiral that lasted until March 2009. Over this (approximately 14-Mth) period, between it highest and lowest points, the BSE 200 shed 64.9% on an absolute basis; HT2F scored over its benchmark by losing 54.8%. In effect, the fund has fared better than its benchmark in both the upturn and downturn. HT2F is no laggard when it comes to competing with peers. Its showing vis-à-vis comparable peers (funds that predominantly invest in the large cap segment) is equally noteworthy.
Despite this, there is no perceptible buzz around the fund. No one is raving about its performance. This is hard to explain. For some obscure reason, HT2F lacks the 'X' (read exciting) factor that is much needed to draw attention.
What investors must do
For one, it would help if you don't let the hype or 'lack of it' affect your investment decisions. Always remember, investing need not be exciting; conversely, as mentioned earlier, boring can be good. You must check with your investment advisor/financial planner if a competent and proven, yet seemingly humdrum fund fits in your scheme of things. And if it does, by all means get invested.
(NAV data sourced from www.hdfcfund.com; data for BSE 200 sourced from www.bseindia.com)
The trouble starts when one reads too much into the 'exciting' bit and makes investment decisions based solely on the same. Also, since most of the fanfare can be attributed to a recent showing, it is difficult to distinguish a 'flash in the pan' from a 'sustainable' performance. And for serious investors, the latter is certainly a more important evaluation parameter.
Then there are funds which don't qualify as exciting ones. Make no mistake, that's not the same as being non-performers. On the contrary, these can be funds that go about playing their part to perfection, but in an understated manner. They often deliver with enviable levels of consistency. Their performance over longer time periods and across parameters can be impressive. Despite this, there is never a frenzy surrounding them. It is not uncommon for such funds to be labelled as 'boring'.
Sadly, most investors fail to realise that in the context of investing, boring can be good. This is because, boring translates into predictability. And predictability means fewer unpleasant surprises. If you are building an investment portfolio to achieve certain objectives, boring funds of the aforementioned variety should account for a lion's share of the portfolio. The fact that a fund isn't in the limelight or isn't perceived as exciting is no reflection on its prowess. A competent performer stays the same irrespective of the attention it garners. HDFC Top 200 Fund (HT2F) is one fund that falls in the category of underrated achievers.
Originally an offering from Zurich India Mutual Fund, the fund became a part of HDFC Mutual Fund subsequent to the former's takeover in 2003. A diversified equity fund, HT2F's investment proposition is quite simple. It largely invests in stocks of companies featuring in the BSE 200 index. An interesting aspect of the fund is that it combines the active and passive styles of investing. It holds around 60% of its portfolio in line with the BSE 200 index. The fund has also benefited from the presence of its fund manager, Prashant Jain (Executive Director & CIO-HDFC Mutual Fund). Incidentally, Prashant Jain was earlier associated with Zurich India Mutual Fund. The fund's long-standing association with the fund manager has served it well.
Now for the performance. For a fund that has been in existence for well over a decade (inception in 1996), HT2F's track record is impressive to say the least. As on July 14, 2009, over the 3-Yr and 5-Yr periods, it had delivered 17.5% CAGR and 31.2% CAGR respectively; the corresponding figures for BSE 200 were 9.9% CAGR and 21.8% CAGR. Over the last 12 months, the fund posted a growth of 22.3% vis-à-vis just 3.1% for its benchmark. HT2F's NAV rose by 21.6% CAGR over a 10-Yr period as compared to 13.8% for BSE 200. And that is no mean achievement!
Any analyst worth his salt will agree that a fund's mettle is truly tested during a downturn. In recent times, after peaking in January 2008, domestic stock markets went into a downward spiral that lasted until March 2009. Over this (approximately 14-Mth) period, between it highest and lowest points, the BSE 200 shed 64.9% on an absolute basis; HT2F scored over its benchmark by losing 54.8%. In effect, the fund has fared better than its benchmark in both the upturn and downturn. HT2F is no laggard when it comes to competing with peers. Its showing vis-à-vis comparable peers (funds that predominantly invest in the large cap segment) is equally noteworthy.
Despite this, there is no perceptible buzz around the fund. No one is raving about its performance. This is hard to explain. For some obscure reason, HT2F lacks the 'X' (read exciting) factor that is much needed to draw attention.
What investors must do
For one, it would help if you don't let the hype or 'lack of it' affect your investment decisions. Always remember, investing need not be exciting; conversely, as mentioned earlier, boring can be good. You must check with your investment advisor/financial planner if a competent and proven, yet seemingly humdrum fund fits in your scheme of things. And if it does, by all means get invested.
(NAV data sourced from www.hdfcfund.com; data for BSE 200 sourced from www.bseindia.com)
