Two consistent Principal Mutual Fund equity schemes for long term wealth creation

In this blog post, we have selected two equity mutual fund schemes from Principal MF stable and looked at their long term performance track record. Principal Emerging Bluechip Fund, a large and midcap equity fund and Principal Multicap Growth Fund, a multi-cap fund have more than 10 years of track record – both have been great long term wealth creators for investors.

Money invested in Principal Emerging Bluechip Fund since inception (around 11 years back) would have multiplied nearly 10 times (as on 19th July 2019); similarly investment made in Principal Multicap Growth Fund since inception (around 19 years) back would have multiplied nearly 14 times (as on 19th July 2019).

Source: Advisorkhoj Research

Both the funds have performed well in the last 5 to 10 year time-scales outperforming their respective benchmarks. Principal Emerging Bluechip Fund gave 13.9% and 17.5% CAGR returns in the last 5 and 10 years respectively, while its benchmark index Nifty 250 TRI gave 10.3% and 12.5% returns respectively. Similarly Principal Multicap Growth Fund gave 10.3% and 12.9% CAGR returns in the last 5 years, while its benchmark index Nifty 500 TRI gave 9.9% and 13% returns respectively.

Performance Consistency

We have discussed a number of times in our blog that performance consistency is one the most important attributes of mutual fund schemes which generate high returns for investors in the long term. A fund can deliver high returns in a particular period if it takes more risks and market conditions favor, but the same fund will underperform if market conditions are not favorable. Funds which perform consistently aim to deliver relatively good returns across all market conditions. Our internal research shows that consistent performers are able to generate higher returns in the long term.

Rolling returns is one of the best measures of performance consistency of mutual funds. Rolling returns measure returns for specified investment tenures across rolling periods over a sufficient long time horizon (covering multiple market cycles). Rolling returns are not biased by current market conditions or market conditions prevailing during a point to point time period. Over a sufficiently long time horizon, they reflect a fund’s performance in different market conditions – both good times and bad times.

Rolling returns of Principal Emerging Bluechip Funds

The chart below shows the 3 year rolling returns of Principal Emerging Bluechip Fund versus its benchmark index (Nifty 250 TRI) since the inception of the scheme.

Source: Advisorkhoj Rolling Returns

You can see that the scheme beat the benchmark most of the times over 3 year investment holding tenures. The scheme outperformed the benchmark on most rolling returns parameters. The average 3 year rolling returns of the scheme since inception is 20.62% (average for benchmark is 14.76%) and the median 3 year rolling returns of the scheme since is 20.87% (median for the benchmark is 15.6%). The maximum and minimum annualized 3 year rolling returns of the scheme is 44.19% and -5.54% respectively. The scheme gave positive 3 year returns 95% of the times since inception (more than 10 years) and more than 8% annualized 3 year returns 80% of the times. Nearly 75% of times, the scheme gave more than 12% annualized 3 year returns and more than 20% annualized 3 year returns, 53% of the times.

The chart below shows the 5 year rolling returns of Principal Emerging Bluechip fund versus the benchmark index (Nifty 250 TRI) since the scheme inception.

Source: Advisorkhoj Rolling Returns

You can see that the rolling returns performance of the scheme versus the benchmark is better over 5 year investment tenures. It was able to beat the benchmark 100% of the times. The average 5 year rolling returns of the scheme since inception is 22.91% (average for benchmark is 16.01%) and the median 3 year rolling returns of the scheme since is 23.44% (median for the benchmark is 16.9%). The maximum and minimum annualized 3 year rolling returns of the scheme are 32.5% and 12.7% respectively. The scheme gave more than 12% annualized 5 year returns 100% of the times since inception, more than 15% annualized 5 year returns 95% of the times and more than 20% annualized 5 year returns, a whopping 62% of the times.

Suggested Reading:

How Principal Emerging Bluechip Fund still a good fund despite short term underperformance

Principal Emerging Bluechip Fund – Money multiplied 10 times in 10 years

Rolling returns of Principal Multicap Growth Fund

The chart below shows the 3 year rolling returns of Principal Multicap Growth Fund versus its benchmark index (Nifty 500 TRI) since the inception of the scheme. The average 3 year rolling returns of the scheme since inception is 19.38% (average for benchmark is 19.36%) and the median 3 year rolling returns of the scheme since is 17.45% (median for the benchmark is 15.0%). The maximum and minimum 3 year annualized rolling returns of the scheme are 73.68% and 34.3% respectively. The scheme gave positive 3 year returns 95% of the times since inception (more than 10 years) and more than 8% annualized 3 year returns 80% of the times. Nearly 75% of times, the scheme gave more than 12% annualized 3 year returns and more than 20% annualized 3 year returns, 53% of the times.

Source: Advisorkhoj Rolling Returns

You can see that, except for a brief period from 2008 to 2011, the scheme beat the benchmark most of the times over 3 year investment holding tenures. It was able to beat the benchmark 100% of the times. The average 5 year rolling returns of the scheme since inception is 22.91% (average for benchmark is 16.01%) and the median 3 year rolling returns of the scheme since is 23.44% (median for the benchmark is 16.9%).

The maximum and minimum annualized 3 year rolling returns of the scheme is 32.5% and 12.7% respectively. The scheme gave positive 3 year returns 85% of the times since inception (nearly 20 years back) and more than 8% annualized 3 year returns 68% of the times. Nearly 66% of times, the scheme gave more than 12% annualized 3 year returns and more than 20% annualized 3 year returns, 43% of the times.

The chart below shows the 5 year rolling returns of Principal Multicap Growth fund versus the benchmark index (Nifty 250 TRI) since the scheme inception.

Source: Advisorkhoj Rolling Returns

You can see that the rolling returns performance of the scheme versus the benchmark is better over 5 year investment tenures. The scheme gave more than 8% annualized 5 year returns 78% of the times since inception, more than 12% annualized 5 year returns 67% of the times, more than 15% annualized 5 year returns 52% of the times and more than 20% annualized 5 year returns, nearly 34% of the times.

Conclusion

In this post, we analyzed in details the rolling returns performance of the Principal Emerging Bluechip Fund and Principal Multicap Growth Funds. Principal Emerging Bluechip and Multicap Growth funds have around Rs 2,200 and Rs 880 Crores of assets under management respectively. The expense ratios of the two schemes are 1.99% and 2.28% respectively. While Dhimant Shah manages Principal Emerging Bluechip, PVK Mohan and Siddarth Mohta manage Principal Multicap Growth Fund. Both the funds have strong performance consistency track records. Both funds are suitable for moderately aggressive to aggressive risk profiles. In our view, investors should have at least 5 year investment tenures for these two funds. Investors should consult with their financial advisors if Principal Emerging Bluechip and / or Principal Multicap Growth Fund are suitable for their investment needs.