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Large cap stocks are the leaders having higher market caps. They enjoy an edge over their mid-sized peers as they are well established, have stable revenues, usually well researched and are more predictable compared to highly volatile mid caps. The most noteworthy of them is their ability to provide stability to the investor's portfolio, during turbulent stock market conditions. Large cap funds are mandated to invest in large cap stocks and tend to outperform the funds in other category during uncertainty of the equity markets. Large cap funds are thus favoured during turbulent times of the equity markets as they are capable of providing stability to one's portfolio.
ING Large Cap Equity Fund (ILCEF) (erstwhile known as ING Nifty Plus Fund), is one such open-ended equity fund from the stable of ING Mutual Fund. It follows a blend style of investing. ILCEF predominantly invests in equity and equity related securities of large cap companies in India, along with money market instruments to manage its liquidity requirements. The fund was launched in February 2004 and has been in existence for a little over 7 ½ years now.
It is noteworthy that the fund has undergone changes in its fundamental attributes from March 25, 2011. Earlier the fund was classified as an open ended index linked equity Fund while now it is classified as an open ended equity fund.
Primary investment objective of the fund is "to seek to provide long-term capital appreciation from a portfolio that is invested predominantly in equity and equity-related securities constituted in the S&P CNX Nifty Index. There can be no assurance that the investment objective of the Scheme will be realized".
The fund is mandated to invest predominantly in stocks forming the S&P CNX Nifty and a small portion of the net assets may be invested in the stocks falling outside the index. The fund abides itself to invest minimum 70% of the corpus in equities including the maximum exposure of 20% to stocks falling outside S&P CNX Nifty. Fund may also invest in cash and money market instruments to manage liquidity with maximum exposure of 30% of its corpus.
Equity Portfolio
| Holdings | June 2011 | July 2011 | Aug 2011 | Sept 2011 | Oct 2011 |
| ITC Ltd. | 6.5 | 7.3 | 8.7 | 8.9 | 9.1 |
| Reliance Industries Ltd. | 6.6 | 6.7 | 6.9 | 7.0 | 7.2 |
| ICICI Bank Ltd. | 8.3 | 9.5 | 6.9 | 5.6 | 6.7 |
| Infosys Ltd. | 7.7 | 8.0 | 6.4 | 7.1 | 6.2 |
| HDFC Bank Ltd. | 4.7 | 5.0 | 6.3 | 6.5 | 5.5 |
| Tata Consultancy Services Ltd. | 3.7 | 3.9 | 3.9 | 4.0 | 4.1 |
| Tata Motors Ltd. | 2.1 | 2.2 | 2.1 | 2.2 | 3.8 |
| HDFC Ltd. | 5.2 | 4.0 | 5.3 | 4.2 | 3.3 |
| Bharti Airtel Ltd. | 1.9 | 2.3 | 3.4 | 3.3 | 3.2 |
| Larsen & Toubro Ltd. | 4.6 | 4.8 | 4.9 | 4.3 | 2.7 |
The table above reveals that ILCEF' portfolio holds some of the most liquid large caps. Its latest portfolio (as on October 2011) comprises of 36 stocks, of which mere 6% are the 'B' group stocks while the rest (94%) are the group ones. The investment mandate of the fund attempts to minimise the risk arising from the poor stock selection and invests predominantly in widely researched index stocks along with derivatives in order to hedge the portfolio, thereby enhancing investors' interest.
The top-10 stocks account for 51.77% of its total holding, whereas the top-5 sectors account for 48.26% of the portfolio. The fund manager refrains from churning the portfolio quite often as revealed by the portfolio turnover ratio of 0.81 times.
How ILCEF has fared vis-à-vis its peers?
| Scheme Name | 6-Mth (%) | 1-Yr (%) | 3-Yr (%) | 5-Yr (%) | Std. Dev. (%) | Sharpe Ratio |
| Principal Large Cap(G) | -11.5 | -19.8 | 28.4 | 8.1 | 7.66 | 0.24 |
| Franklin India Bluechip(G) | -6.1 | -11.2 | 27.2 | 9.4 | 6.73 | 0.25 |
| Birla SL Frontline Equity(G) | -8.9 | -17.1 | 25.6 | 9.8 | 7.47 | 0.22 |
| ICICI Pru Top 100(G) | -7.8 | -13.8 | 21.9 | 6.1 | 6.47 | 0.21 |
| ING Large Cap Equity(G) | -8.4 | -16.8 | 20.5 | 4.7 | 7.36 | 0.17 |
| Reliance Vision-Ret(G) | -16.0 | -25.4 | 18.9 | 5.0 | 7.48 | 0.18 |
| S&P CNX Nifty | -9.3 | -17.6 | 20.8 | 5.1 | 7.76 | 0.17 |
The table above reveals that ILCEF's performance has not been very luring so far. Even though over a 3-Yr and 5-Yr time frame, the fund has clocked a return of 20.5% CAGR and 4.7% CAGR respectively, the fund has underperformed its benchmark – S&P CNX Nifty Index and most of its peers under both these time frames.
On the volatility front ILCEF has certainly exposed its investors to low risk (as revealed by the Standard Deviation of 7.36%), but the risk-adjusted returns (as revealed by the Sharpe Ratio of 0.17) clocked too have been middling and nothing to vie for when compared to its peers.
Fund Manager Profile
| Name of the Fund Manager | Mr. Ramanathan K. |
| Total Work Experience | Over 12 years |
| Managing the fund since | May-11 |
| Qualifications | CFA,PGPM, B.E(Mech) |
ILCEF's performance has not been very luring so far. Even though over a 3-Yr and 5-Yr time frame, the fund has clocked a return of 20.5% CAGR and 4.7% CAGR respectively, the fund has underperformed its benchmark – S&P CNX Nifty Index and most of its peers under both these time frames. Despite having a flexibility of investing up to 20% of its assets in non-index stocks fund has failed to outperform the S&P CNX Nifty. Moreover, it has not generated any risk adjusted returns in excess of those generated by S&P CNX Nifty. It defeats the principle of active fund management. The high expense ratio of 2.50% has also eaten into the returns generated by the fund.
Merely investing in a large cap fund neither assures you success in mutual investing nor it exposes you to lesser risk. But selection made after doing in-depth analysis certainly enhance your chances of generating competitive returns at lower risk.
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