Principal Largecap Fund Review

Principal Largecap fund, a newly launched equity mutual fund by NFO (New Fund Offering) between 28^th September 2020 to 12^th October 2020. During this NFO period, you can get 1 unit for Rs. 10 as NAV (Net Value Asset).

The fund will impress the investor, as it has two facilities

• Smart
• My Gain

The tagline of the fund is “Get Bigger Together”. As mentioned together, the fund is going to invest in both Indian and American large cap funds.

Let’s have a deep dive into the fund overview and other aspects.

Principal Largecap Fund Overview:

• This is the first-ever Largecap fund that invests in top companies in India and America.
• An open-ended equity fund that invests predominately in Largecap stocks.
• The fund will be allocated by 80-85% of Largecap stocks from Indian companies and 15% in the US companies.
• It is compared with NIFTY 100 TRI as a benchmark

What are Largecap Stocks?

India – The Top 100 companies of the Indian stock market decided by the market capitalization are termed to be Largecap stocks

America – The companies with a market capitalization of more than $50 Billion are the Largecap stocks.

• The fund is completely diversified with 45 – 50 Largecap stocks across 4-5 sectors.
• The fund has been categorized under a moderately high-risk profile.
• This fund will benefit them long term investors to hold their investments for another 20 years.
• Also, those who have an interest in US stocks can opt for this fund.

Principal Largecap Fund – Facilities:

As we informed earlier of this article. The fund comes with two facilities to benefit the investors too,

• Protect their capital from the market crash or fall.
• To leverage the return as set by investors as the target rate.

The facilities are,

1. Smart:

• The facilities are used whenever the market falls sharply to less than 3%.
• 25% of the fund will be allocated to the Principal Large-cap fund and 75% of the fund will be parked in the Principal Cash Management Fund.
• In case the market doesn’t fall, the fund from the Principal Cash management fund will automatically transfer to the Principal Large-cap fund.

2. My Gain:

• This facility is used for triggering the targeted returns as per the investor’s appetite.
• As per this facility, when the investment amount in the Principal Large-cap fund reaches the target rate of return.
• The fund amount or Units from principal large cap funds can be shifted to any principal funds as per the investor’s choice.

Advantages of Principal Large Cap Fund:

• Large-cap stock investments will always have low risk compared to other companies.
• Investing in US stocks will have extra Dollar appreciation in value. The dollar cost in 2010 was Rs. 60 and currently, it is around Rs. 74.
• The option is SMART is awesome. An investor should be more vigilant in protecting the cash.
• The large-cap companies have steady revenue and will have sustained growth in the future.
• Principal mutual funds AMC has over 141 years of experience in handling US stocks.
• Investing in fundamentally strong companies.
• Principal manages asset values of twice of total Indian mutual fund industry in the US.
• Will get a chance to invest in World-leading companies like Amazon, Apple, Alphabet, Google, Netflix, JP Morgan, etc.

Industry Average – Large Cap Funds:

• Expense Ratio for Direct plan – 1.22%
• Expense Ratio for Regular plan – 2.24%
• The Category average of large cap funds returns are
  • 1 year – 0.75%
  • 2 years – 3.61%
  • 3 Years – 4.51%
  • 5 Years – 7.97%
  • 7 years – 11.23%.
• Category average Risk Management
  • Standard Deviation – 17.22
  • Beta – 0.81
  • Sharp Ratio – 0.05
  • Treynor’s Ratio – 0.01
  • Jension’s Alpha – (1.51)
• The number of holding (category average) – 43.53 stocks.

Other Details:

• The scheme comes with both Direct and regular plans. Also has both dividend and Growth options
• The minimum one-time investment starts at Rs. 5000 to open the fund.
• A systematic Investment plan can be chosen by investing a minimum of Rs. 500 per month.
• To start the SMART facility, the minimum investment will be Rs. 25000.
• Systematic Transfer Plan can opt from Rs. 1000 per month in a minimum of 6 installments.
• No entry load. Exit load of 1% if redeemed within 365 days.

Principal Largecap Fund – Fund Managers Profile:

1. Mr. Sudhir Kedia:

• He has an experience of 13 years in equity research in AMC’s.
• Before Principal Asset Management company, he worked with Mirae AMC, and ASK Investment.
• In principle AMC, he looks after 3 funds
  • Principal Tax Savings Fund
  • Principal Equity Savings Fund
  • Principal Midcap Fund
• The average 5-year returns of these 3 funds are around 8%.
• The return of these funds is not impressive. The category average is at 10.5% per annum

2. Mr. Anirvan Sarkar:

• He has an overall 9 years of experience in sell-side and buy-side research.
• Before Principal AMC, he was associated with Motilal Oswal Securities, Equirus Securities, CRISIL Global Research, and was a candlestick advisor.
• In principle AMC, he manages the Principal Global Equity fund.
• The 5 years return of the fund is 7.24% per annum

Insights to Investors:

• Investors who look for long term investing with consistent performance can choose the fund.
• Currently, please stand away from investing in the Equity market. As the market may correct or crash at any point.
• Once, the market corrects. You can start investing in these types of funds.
• Most funds of Principal AMC are more volatile than the category average and NIFTY 100 TRI index.
• SMART facility and US stocks seem to be positive take points.
• The fund manager’s history is very pathetic.

Also, have a look at the basics of Equity Mutual funds