Birla Sun Life Monthly Income Plan is a hybrid fund that primarily invests in debt instruments with small exposure to equity securities, upto 15 per cent of total net assets. Launched in July 1999, this fund is a pioneer in the Monthly Income Plan - Conservative category and maintains the second largest AUM (assets under management) in this category with an average asset size of Rs 693 crore as of the quarter ended December. The fund is managed by Satyabrata Mohanty (debt) and Nishit Dholakia (equity).
Investment objective
The investment objective of the fund is to generate regular income so as to make monthly and quarterly distributions to unit holders and the secondary objective is growth of capital. The higher debt component with a small equity exposure in the fund portfolio seeks to provide stable returns on a regular basis.
Performance
The fund has managed to outperform its benchmark (Crisil MIPEX) and peers during the last six months, 1 year, three years and five years (see chart). Over a five-year term, the fund has delivered returns at a Compound Annual Growth Rate of 8 per cent as against a peer average of 6.28 per cent for the same period and 6.48 per cent by the benchmark.
An investment of Rs 1,000 in the fund in April 1, 2002 would have grown to Rs 2,393 on January 12, 2011. The same amount invested in the peer group would have returned Rs 1,896 and in the benchmark would have returned Rs 2,035. This depicts the growth shown by this fund over longer periods of time.
Active portfolio management
The duration of the debt portfolio has been actively managed by the fund manager at various interest rate movements across time intervals in the last three years. Reducing the duration when yields are hardening enables the portfolio to deliver better returns and vice versa.
The fund manager has actively adjusted the maturity of the fund with the increasing yields at various time intervals.
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When compared with the peer group, Birla Sun Life Monthly Income Plan has done a relatively aggressive management of the average maturity. The fund has actively managed its duration by increasing the duration when yields are falling and lowering of duration at the time of rising yields, thereby enabling the fund to deliver superior returns than its peers.
Consistent dividend pay-outs
The fund has distributed dividends in 123 out of the last 135 months indicating its consistency in terms of regular dividend pay-outs. The months where the dividend payments were missed were mainly the sluggish market phase i.e. in the year 2000 and 2008. The average dividend yield of the fund over this period is 0.83 per cent against the peer average of 0.53 per cent.
Portfolio analysis
In the last 3 years, the fund manager is maintaining an average equity exposure of 12 per cent. This is slightly higher than the 11 per cent exposure to equities of peers during the same period. The fund being conservative in nature had maintained low equity exposures in the range of 9-9.5 per cent in October 2008 and November 2008 period when markets were bearish. The active equity-debt management by the fund manager based on his equity market and interest rate views has delivered outperformance since inception.
Credit risk mitigation has also been a key observation in the portfolio wherein a majority of the portfolio is invested in the highest rated debt papers. During the last 3 years, 90 per cent of the debt portfolio on an average is invested in the highest rated debt securities.
— Crisil Fund Services