Principal Emerging Bluechip Fund is the top rated open ended mid cap equity mutual fund managed by Principal Mutual Fund AMC, a joint venture between the Principal Financial Group and Punjab National Bank. The JV brings together the global financial expertise of the Principal Financial Group, one of the leading global financial companies headquartered in the United States, with the local knowledge of the Indian market of Punjab National Bank, one of the largest public sector banking entities in India. As a midcap equity fund, the Principal Emerging Bluechip Fund would mainly be invested in potentially high risk-high growth mid cap companies operating in India.
About Emerging Bluechip Equity Funds
The term “bluechip” is commonly used to refer large cap companies that are considered to be the safest equity investments available to investors. These companies are established market players with substantial market share in their chosen sectors, and have good cash flow and profitability. Hence, they are capable of surviving the most challenging of market conditions. However, the safety of these investments does come at the price of a potentially lower rate of capital appreciation in the long term. Emerging bluechip companies, on the other hand, are companies in the mid cap and small cap space with high potential for future growth though they are currently trading at a discount and feature a much smaller capitalization. Emerging bluechip funds such as the Principal Emerging Bluechip fund focus on identifying and investing in these smaller companies. Hence, they are potentially high growth funds with an equally high degree of investment risk attached to the investment. As a result, an emerging bluechip equity fund is often termed as an opportunities fund since the key to its success is correct identification of companies that have the opportunity of being bluechip / large cap companies of the future.
Principal Emerging Bluechip Fund Investment Objective
The Principal Emerging Bluechip Fund Growth plan is focused on maximizing capital appreciation for those investing into the fund. On the other hand, an investor who makes his/her investment in the Principal Emerging Bluechip Fund dividend option can look forward to receiving reasonable dividend payouts while the investor stays invested in the equity mutual fund. To achieve these key objectives, the scheme would invest 65% to 95% of its available capital in equities as well as equity derivatives of mid-cap companies, while an additional 5% to 15% would be invested in the equities as well as equity derivatives of small cap companies.
Additionally the scheme can also keep a smaller portion of its portfolio invested in equities and equity derivatives of large cap companies as well as various debt and money market schemes if the market situation so demands.
The fund considers mid cap companies to be those that that have a market capitalization in the range that fits those of companies featured on the Nifty 100 Midcap Index, while small cap companies are those that have a market cap lesser than the smallest company featured on the index. For all intents and purposes, the Nifty 100 Midcap Index also serves as the benchmark for this midcap scheme. Even though the stated scheme objective of the fund mainly focuses on mid cap companies in the Nifty 100 Midcap Index, it is free to invest in companies outside of that index including IPOs that fit the fund’s investment objective.
Historically, the scheme has invested in value stocks that have featured efficient management, superior and sustainable competitive advantage as well as solid financials and excellent future growth prospects. It has, therefore, been classified by most experts as a growth oriented equity mid cap mutual fund. In recent years, the fund has invested almost equally in large cap and mid cap companies with small cap equities forming a much smaller portion of the scheme’s portfolio. Perhaps, as a result, the fund has been outperforming most of its peers as well as its benchmark for most years since its inception almost a decade back.
Risk Level of the Principal Emerging Bluechip Fund
The Principal Emerging Bluechip Fund is an equity fund. Hence, it is subject to all the risks including risk to the principal invested due to market fluctuations, which is inherent to all equity investments. The key and most basic risk that is featured in case of an equity fund is the risk of volatility due to various market forces that affect equity investments. Moreover, this equity fund is mainly invested in mid cap and small cap companies, which while suitable for providing potentially high returns to the investor in the long term also feature a much higher degree of volatility in terms of equity valuation as compared to large cap investments. Thus, even in the presence of diversification strategies designed to invest in a range of sectors, the risk level of investments made into the fund is classified as high.
Tax Considerations of the Principal Emerging Bluechip Fund
The Principal Emerging Bluechip Fund is an open-ended equity fund thus the rules of capital gains with respect to equity investments will apply to the fund. The current taxation rules consider investments made into the fund for up to one year counted from the date of unit allotment as short term investments, while investments made into the fund for over 1 year are considered as long term investment. Therefore, any profits made from the fund through redemption or switching prior to completion of 1 year from the date of unit allotment would be subject to short term capital gains tax of 15% on the profits made. If the redemption or switch of units from Principal Emerging Bluechip Fund regular growth or any variant is made after 1 year from the date of unit allotment, long term capital gains taxation rules will apply. The current rate of long term capital gains tax for equity mutual funds is nil. Any dividends received by the investor from the fund at any point of time are completely tax free.
Principal Emerging Bluechip Fund Key Features and Statistics
Inception: This scheme was first available for investment by individual investors in November 2012.
Entry Load: This open-ended equity fund scheme and all its variants such as the Principal Emerging Bluechip Fund Growth Plan have nil entry fees after SEBI issued a directive to this effect.
Exit Load: The exit load of this equity mutual fund is 1% of the total redemption made by the investor if the fund’s units are redeemed prior to completion of 365 days from the date of unit allotment.
Minimum Investment Amounts: For a new investor subscribing in the Principal Mutual Fund Direct Growth plan or any other variant, the minimum lump sum investment amount is Rs. 5000. In case of SIP, the minimum single transaction SIP amount is Rs. 2000 with the minimum tenure of the systematic plan being 6 monthly installments. In case of additional investment by an existing investor, the minimum lump sum investment amount is currently fixed at Rs. 1000.
Fund Manager: Since June 2011, the fund and its variants including the Principal Emerging Bluechip Fund Growth Plan and Dividend plan are being by Mr. Dhimant Shah. He is an industry veteran with over a decade of experience and prior to joining HDFC Mutual Fund AMC in 2007, he worked with key companies in the sector including IL&FS AMC, ASK Raymond James Securities Pvt. Ltd. and Reliance Mutual Fund AMC. He is a Chartered Accountant with a B. Com Honours degree.
Plans and Options for Principal Emerging Bluechip Fund
Direct Plan: The Principal Emerging Bluechip Fund Direct Growth or Direct Dividend option requires the investor make their investment directly with the Principal Mutual Fund AMC. Direct plans feature a higher NAV as compared to the regular variant of the scheme, while providing a slightly higher return in the long term due to the lower expense ratio. For those seeking income from their scheme while remaining invested, the dividend option is preferable, while you should opt for the Principal Emerging Bluechip Fund Direct Growth option in case you are seeking a high degree of capital appreciation in the long term.
Regular Plan: The regular plan on offer from Principal Mutual Fund AMC is available through multiple brokers and 3rd party market intermediaries though you could also invest in the regular plan through the mutual fund house directly. As a result of the multiple number of routes available to the investor, the regular option of the Principal Emerging Bluechip Fund growth plan is by far the most common type of investment available. A smaller number prefer to invest in the dividend plan simply because they prefer periodic returns as compared to a higher degree of capital appreciation at the time of redemption or switching.
Growth Option: The growth option is available either as Principal Emerging Bluechip Fund Direct Growth or as Principal Emerging Bluechip Fund Regular Growth. It would feature no payouts by the mutual fund company while an investor stays invested in the scheme. However, as and when the fund’s investments generate profits, the profits will be invested back in order to increase the AUM and by extension the NAV of the mutual fund scheme. The higher NAV provides capital appreciation when the investor switches or redeems units of the scheme at a later date.
Dividend Option: Some investors prefer the dividend option as these provide income while the individual keeps his/her money invested in the scheme. Dividends however are only provided in case there is a distributable surplus and the fund management decides to distribute the dividend. There are two ways such dividend is distributed, dividend payout occurs when the money is directly credited to the investor’s bank account, while dividend reinvest features conversion of the dividend into units of equal value, which is added to the holdings of the investor.
Top Holdings of Principal Emerging Bluechip Fund
The following are some top equity investments made by Principal Emerging Bluechip Fund across key sectors.*
|Banking and Financial Services||City Union Bank, HDFC Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, RBL Bank, Yes Bank, Canara Bank, State Bank of India, Delta Corp, Bharat Financial Inclusion, ICICI Prudential Life Insurance Company, Dewan Housing Finance Corporation, Central Depository Services Ltd., Muthoot Finance, Bajaj Finance, etc.|
|Automotive||Eicher Motors, Tata Motors, Amara Raja Batteries, Gabriel India, Motherson Sumi, MRF, etc.|
|Chemicals and Pharmaceuticals||Himadri Special, Navin Flourine, Tata Chemicals, UPL, Atul, GSFC, Finolex Industries, Aurobindo Pharma, Natco Pharma, Torrent Pharma, etc.|
|Cement and Construction||Dalmia Bharat, India Cements, Ramco Cements, Shree Cements, Asian Granito, Kajaria Ceramic, Hindustan Construction Company, PSP Projects, etc.|
|Engineering and Capital Goods||Schaeffler India, AIA Engineering, BEML, NBCC (India), Sadbhav Engineering, KEC International, etc.|
|Oil and Gas||Gujarat State Petronet, Indraprastha Gas, Petronet LNG, HPCL, IOC, etc.|
|Manufacturing||Ramkrishna Forgings, Bharat Electronics, Mold-Tek Packaging, S P Apparels, SRF, Ganesha Ecosphere, Vardhman Textiles, etc.|
|Mutual Funds||Principal Short Term Income Fund (Direct Growth), Principal Cash Management Fund (Growth), etc.|
|Others||AB Nuvo, Orient Paper, Voltas, Symphony, Bajaj Electricals, Bata India, Britannia, Triveni Engineering and Industries, Cyient, Infosys, PVR, Sun TV Network, Hindalco, Hind Zinc, Gateway Distriparks, Sheetla Foam, HUDCO, SpiceJet, Finolex Cables, Tata Communications, BEML Ltd. etc.|
*This list is an illustration only and periodic changes may occur based on requirements of the fund and SEBI guidelines.
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