HDFC Top 100 Fund

ISIN INF179K01BE2

Overall analysis 

3-yr rolling excess returns is in the range of 4-8% and tracking error against benchmark has been in the range of 2-7% overall; but the funds’ performance in the short run has been deteriorating. The fund has given the maximum excess return in comparison to its peers; but has been neutral to the first quartile over the past 1 year.

Performance analysis 

Rolling returns in quartiles

The rolling return chart shows excess 3-year annualised returns in context of peer return quartiles. The blue line’s time above the third green median line indicates the fund’s better than median performance.

As per the rolling return chart of the fund we can see the fund is very fluctuating. It was above the third green median line in June 2016 but came down also in September 2020 and now it is above the line so it is better than median performance. 

Rolling risk/return (Snail-trail) 

The rolling risk/return chart shows excess 3-year annualised returns relative to the index. The top left quadrant would indicate higher returns with lower volatility than index.

This fund has not shown impressive 3-year excess returns, significant time it was around the negative 4-6% pa, whilst lower than index volatility of 2-3% pa. However, the excess return came down to around -6.21% in October 2020.

Tracking error

The tracking error chart shows how the fund ‘tracks’ against the index. The higher the TE, the more active the fund’s return has been, with the 2-4% range considered to be barely active, 4-6% range considered to be reasonably active and anything higher attributed to concentrated/focused funds. Funds with TE of less than 2% can be considered to be closet indexers.

Comment on chart

Information ratio

The information ratio is a measure of ‘risk-adjusted return’ as it’s the excess return per unit of excess volatility. Active funds should have IR of higher than 1, ideally higher than 1.3 at least to indicate skill. 

The information ratio of the fund was above 1 in June 2016 which was good but then it came down to -4.5 around June 2020 and now it is around 1.4 which is an ideal information ratio. 

Portfolio analysis

Stock style chart

Morningstar’s stock style chart shows the ‘style’ of the stocks in the portfolio in terms of size and value/growth style. The centroid shows the weighted average while the zone circle shows how varied the stock styles are.

The style chart shows that the fund is typically blended in the large segment .

Factor profile chart

Morningstar’s factor profile shows the historical style analysis of the stocks in the portfolio in terms of size, value/growth style and other key factors. The blue circle shows the fund relative to the black dot for the category average.

The factor profile chart shows that the yield is low,momentum is high,quality is also low and volatility & liquidity is low and the size is large as compared to last 5 yr historical range.

Prepared by – Shreyas Walve, August 2023