Launched in 1997, DSP BlackRock Equity Fund (DSPBEF) is a diversified equity fund with assets under management of Rs 1,748 crore as on February 2010. It is among the few consistent performers on the CRISIL~Composite Performance Ranking (CPR) with CRISIL~CPR 1 rank in 11 out of the last 12 quarters. CPR is a relative performance ranking of mutual fund schemes within a peer group. The fact that DSPBEF has ranked consistently in the top 10 of its peer category indicates the fund combined superior performance with disciplined portfolio management. The fund’s performance over various parameters of the CRISIL~CPR framework is notable.
Performance
DSPBEF’s performance over the long term can best be described as robust. It posted 27.1 per cent compounded annualised growth rate (CAGR) over five years, which is markedly superior to the benchmark index (S&P Nifty, up 19 per cent) as well as the peer average (21.2 per cent CAGR). Likewise, the fund has registered a 16 per cent CAGR over three years, which is a cut above the benchmark index (7.7 per cent CAGR) and the competition (9.8 per cent CAGR).
Over the recent past, the scheme has benefited from the broad-based rally in stock prices. This is evident from its net asset value, which has appreciated 89.9 per cent over the last 12 months. Again, the scheme has outperformed the benchmark index. The scheme’s performance since inception has also been ahead of the benchmark index. It has appreciated five times, that is, an investment of Rs 1,000 in the scheme would have grown to Rs 5,002 compared with Rs 4,655 for the benchmark index.
Scores high on risk
The scheme’s performance on risk-adjusted return relative to its peers is high and one of the key factors for propelling its performance to CRISIL~CPR 1. The CRISIL~CPR ranking methodology assigns highest weightage to this parameter, as it underscores a fund’s ability to post higher returns on a risk-adjusted basis relative to its peers.
Diversification at company and industry level
The fund maintains a well-diversified portfolio across market capitalisations with a bias towards large-cap stocks. The number of stocks in the portfolio over the last two years ranged from 64 to 83 stocks. The top 10 stocks in the portfolio have usually accounted for less than 40 per cent of assets. As on February 2010, the scheme had the highest exposure of 4.65 per cent to Reliance Industries.
Portfolio concentration is a measure of the relative proportions of different securities in a portfolio. This is an important parameter for a scheme’s evaluation, as Indian financial markets are evolving and are yet to attain depth and maturity. Crisil evaluates industry and company concentration, as it is crucial for an equity scheme to stand out on both the parameters to effectively mitigate risk.
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The industry concentration parameter measures the exposure of a mutual fund in various industries relative to the industry distribution pattern in the respective benchmark index (in case of an equity fund). The company concentration parameter gauges the diversification of the underlying securities in the portfolio.
Investment style - Portfolio review and performance analysis
The scheme takes active cash calls depending on the market phase. For instance, for most of 2008 when equity markets were volatile, the scheme had less than 90 per cent of assets in equities and equivalent, and this dipped to a low of 80 per cent in November 2008. Its strategy in 2009 witnessed a reversal of sorts with equity allocations rising to coincide with the bullish sentiment in equity markets since May 2009. Its equity allocation since May 2009 has averaged around 95 per cent of assets. Over the last two years, banks, refineries and pharmaceuticals have accounted for around 25 per cent of its portfolio, reflecting the fund manager’s view on the long-term potential of these sectors.