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Has HDFC Top 200 delivered?
Personalfn.com | July 28, 2008 15:16 IST
Despite having been in existence for a while, index funds have never quite captured the domestic investor's imagination. And the reasons are not hard to see, given that index funds have been outscored by actively managed funds for a better part of their existence.
However, a related investment style i.e. index-plus investing has delivered better results. Index-plus investing combines active and passive investing, thereby attempting to capitalise on the best of both worlds.
Over the years, HDFC [Get Quote] Top 200 Fund has made a name for itself as a proponent of index-plus investing. In this article, we put HTF's investment proposition under the scanner and study its performance.
HTF's investment proposition
The fund's mandate also permits it to invest in listed companies that would qualify to be in the top 200 by market capitalisation on the BSE, even though they may not be listed on the BSE. By aligning itself to the broad-based BSE 200 index, the fund manager has the liberty to invest in mid cap stocks, while anchoring a larger portion of the portfolio in large cap stocks for stability.
Given that HTF offers a rather unique investment proposition, it doesn't have strictly comparable peers. Hence for the purpose of peer comparison, we have chosen predominantly large cap funds, which invest a smaller portion of their portfolios in mid caps i.e. funds pursuing an investment style similar to the one pursued by HTF.
With 28.6 per cent CAGR over the 3-Yr time frame, HTF is second only to Kotak 30 (29.3 per cent CAGR) in the peer group. The fund (40.0 per cent CAGR) pitches in an impressive showing over the 5-Yr period as well. Since inception in October 1996, the fund's net asset value has risen by 30.1 per cent CAGR. HTF has successfully outscored its benchmark index over the 1-Yr, 3-Yr and 5-Yr time frames respectively.
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-�-vis those offered by a risk-free instrument)
As can be seen in the graph above, Rs 100 invested in HTF 5 years ago (July 2003) would be worth Rs 558 at present. Conversely, an investment in its benchmark index would have yielded only Rs 404.
In a nutshell...
What should investors do?
Therefore, investors would do well to consult their investment advisors/financial planners to determine the suitability of HTF in their portfolios.
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