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A sum of Rs 10,000 invested in HDFC Equity Fund at its inception 20 years ago would have grown to Rs 4.7 lakh by now. If an investor would have opted for a systematic investment plan in the fund of Rs 2,000 a month, he or she would now be sitting on Rs 1 crore.
With Prashant Jain as fund manager, it is now one of the longest running equity schemes in the Rs 12 lakh crore domestic mutual fund (MF) sector. It had Rs 52 crore in assets under management in 1995; now, this has become Rs 18,000 crore. The biggest MF and one of the most successful, with a compounded annual growth rate of a little over 20 per cent.
The scheme has held steady during all major market-moving developments of the past two decades. In its first decade, the scheme witnessed the Asian currency crises, the infotech bubble of 2000, the Ketan Parekh scam and crisis in Unit Trust of India. In the second decade, there was the Bharatiya Janata Party’s loss in the general election of 2004 and the Congress-led coalition's two subsequent wins, the global financial crisis of 2008, followed by scams like Satyam, telecom and coal allocation, among others. Also, the multiple quantitative easing programmes.
“I have to be very mindful of what risks I am taking. In the long run, someone who does not have a long period of bad performance is the winner,” says Jain, executive director and chief investment officer.
The fund has outperformed its benchmark, the CNX 500, for 18 of the past 20 years. The minimum positive absolute return it generated was 22.6 per cent in 1997 and the highest was in 1999, at 156 per cent. In 2014, the fund gave 53.8 per cent, the highest in five years.
“Equities are volatile in the short term but in the longer term, it outperforms virtually every other asset class,” says Jain. Adding: “We might or might not do well at times but one thing we have done successfully is that we have not lost serious money. Preventing big mistakes is more important to long-term return than going for the big returns (in a short time).”
Poor performance of some schemes managed by Jain between 2011 and 2013 had got several criticism by market participants. However, it did not make him change his philosophy and the patience has paid in the long run.
HDFC EQUITY FUND WITNESSED IT ALL
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1996: General elections — Congress loses
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1997: Asian currency crisis
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1998: Pokhran II - nuclear test by India, US sanctions, Sensex down 20% in two months
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1999: Kargil war, Sensex up 63 per cent, 10 year G-Sec yields at 12.3 per cent
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2000: Tech bubble
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2001: 9/11 attack on the US, Ketan Parekh scam, UTI crisis, IT stocks decline 80-90 per cent
