The fund occupied Fund Rank 1 in the aggressive hybrid category in Crisil Mutual Fund Ranking for the quarter ended June 2018
Launched in January 2000, Principal Hybrid Equity Fund aims to provide long-term capital appreciation and current income by investing in a portfolio of equity, equity-related securities and fixed income securities. The fund occupied Fund Rank 1 in the aggressive hybrid category in Crisil Mutual Fund Ranking (CMFR) for the quarter ended June 2018.
It has been managed by P V K Mohan (experience - 25 years) and Bekxy Kuriakose (experience - 18 years), since May 2010 and March 2016, respectively. The fund's assets under management (AUM) rose exponentially from Rs 29 crore in July 2015 to Rs 12,81 crore in July 2018, and quintupled in the last one year.
Trailing returns
In terms of trailing returns, the fund has outperformed the benchmark (Crisil Hybrid 35+65 - Aggressive Index) over all the long-term trailing periods with timeframe of one-year and above. It demonstrated a similar trend against the category (represented by funds ranked in the aggressive hybrid category in CMFR), barring the 10-year historical performance.
SIP returns
A monthly investment of Rs 10,000 via a Systematic Investment Plan (SIP) for 10 years would have grown to Rs 25.98 lakh (XIRR 14.85%). A similar investment in the benchmark would have grown to Rs 23.01 lakh (XIRR 12.56%).
Risk-reward matrix
The fund delivered higher average daily returns over the past three years relative to the benchmark and peers, commensurate with the higher volatility experienced by the fund.
Portfolio analysis
During the past three years, the fund invested in 140 stocks across 30 sectors; of these, 18 stocks were held consistently.
The following top five sectors constitute 62.1% of the fund's equity portfolio as of July 2018. Banks have the highest allocation of 19.78% followed by consumer non-durables (15.83%), software (12.12%), finance (8.65%) and petroleum products (5.71%). In terms of market capitalisation, the July 2018 portfolio indicates that the fund has an inclination towards large-cap stocks, which formed more than 72% of the fund's equity portion.
In three years, the banking sector had the highest average allocation of 17.71%. Over this period, HDFC Bank, Kotak Mahindra Bank and ICICI Bank were the top contributors amongst the banking stocks.
The consumer non-durables sector had average allocation of 12.49%. Hindustan Unilever has been the top performing stock from this sector, featuring in the portfolio consistently since January 2017. Moreover, all three of the consistently held stocks – Bombay Burmah Trading Corporation, ITC Ltd and Britannia Industries – played a significant role in the fund's outperformance.
Outside of banking and consumer non-durables sectors, Reliance Industries (petroleum products), Maruti Suzuki India (auto) and Hindustan Zinc (non-ferrous metals) were good performers.
On the debt side, the fund held risk-free government securities (5.84%) and a combination of NCD/bonds (11.81%) & CP/CDs (10.98%) with predominant exposure to AAA/A1+ rated instruments.
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