HDFC Equity Fund one-year return slides to 4.75% returnThe performance of the iconic HDFC Equity Fund has slid to just 4.75% over the past year and 8.8% CAGR over the past three years. The poor showing is adding to pressure on this giant-sized fund to pull up its socks and perform.

With an AUM of Rs 21,553 crore and a cult-status among investors, HDFC Equity Fund is one of the giant funds of the mutual fund industry. It was initially a large-cap fund but has chosen to take the multi-cap category under the new SEBI classification system. This allows it to stay large cap but venture into small or mid-caps if the fund manager deems it necessary.

HDFC Equity was launched in 1995 and has a given a CAGR of 19.12% since inception. This is impressive by virtually any yardstick. The fund is managed by Prashant Jain who has a huge personal following among investors and is one of the highest paid managers in the industry.

However, the fund has been slowing down lately. Past glory is of little comfort to those who invested in the past three years or one year. The fund has been beaten by its benchmark and category average over these time periods. The current benchmark (Nifty 500 TRI) is the same as what it was before the SEBI classification exercise. The underperformance over the past year is acute with a nearly 8% lower return on the fund compared to its benchmark.

Period Fund (%CAGR) Benchmark (% CAGR) Value Research Category Average (% CAGR)
One Year 4.75 12.58 11.12
Three Years 8.79 11.35 9.37

The Bright Side

If you look at still longer periods, five years and ten years, the fund remains an outperformer. It has delivered 15.06% and 12.09% CAGR over the past five and 10 years, respectively. On a five year basis, however, this state of affairs is only hanging on by a thread.

Period Fund (%CAGR) Benchmark (% CAGR) Value Research Category Average (% CAGR)
Five Years 15.06 15.01 14.03
Ten Years 12.90 9.43 9.33

Equity is indeed a long-term asset and should ideally only be selected for time horizons for five years or longer. The slowdown may not be a reason to exit the fund, quite just yet. However, it is likely to give pause to new investors or those deploying fresh money in the fund. Investors should keep in mind while making their fund selection.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.