Principal Emerging Bluechip Fund  has beaten its benchmark in six of the eight years since its launch. The fund defines 'mid caps' as stocks with market cap that falls within the range of the Nifty Midcap Index.

Principal Emerging Bluechip Fund  hunts for companies with sustainable improvement in growth prospects and return ratios over the next two to three years. It looks for firms with a good management track record and also trading at attractive valuations. It specifically scouts for stocks under owned by institutions.

Principal Emerging Bluechip Fund is benchmark aware but is not driven by index weights in its portfolio construction. While not wedded to index weights, it has prudent in house sector and stock exposure limits, which it strictly adheres to. The fund typically parks 40 per cent each in large-caps and mid-caps, with a residual small-cap allocation. In recent times, it has been overweight on large-caps relative to the category.

While other mid-cap funds have had trouble beating their benchmarks in the last one year, this fund has managed convincing outperformance. The fund's returns are ahead of benchmark returns by 3 to 8 percentage points on a three and five year basis. It beat the category returns by 3 to 4 percentage points. This lead widened in the last one year.

The fund hasn't really been tested in a big bear market and lost more than the index in 2011. With assets of about Rs 1,400 crore, it owns about 80 stocks in its portfolio. Its strong returns of 30 per cent since its launch make it a good choice.