Birla Sun Life Frontline Equity Fund, launched in August 2002, has an asset size of Rs 2,806 crore as of quarter-ended December 2011. This is more than double the category average of Rs 1,152 crore. The fund is classified as a large-cap equity fund under CRISIL Mutual Fund Ranking, where it has ranked in the top thirty percentile over the last eight quarters till September 2011.
The consistency in ranking is an indication of the fund’s superior performance and disciplined portfolio management. Mahesh Patil has been managing this fund since November 17, 2005.
Performance
It is a flagship fund of Birla Sun Life Mutual Fund. As on January 3, 2012, the fund has posted annualised returns of 20.06 per cent over three years, vis-à-vis 17.29 per cent by the category and 16.73 per cent by the benchmark (BSE 200).
It has also outperformed the benchmark as well as the S&P CNX Nifty over one-, three-, five- and seven-year timeframes.
The fund’s performance vis-à-vis peers and the benchmark can also be gauged from the growth of an initial investment of Rs 1,000 in the fund at the time of its launch to an estimated Rs 8,001 as on January 3, 2012. A similar investment in the category would have returned Rs 7,253, while the benchmark index would have appreciated to Rs 5,302.
A systematic investment plan of Rs 1,000 per month invested for seven years (principal Rs 84,000), would have grown to Rs 1,22,497 vis-à-vis Rs 99,127 by the benchmark, delivering a 11 per cent return compared with 4.6 per cent by the benchmark.
In terms of volatility, the fund is less volatile (25.55 per cent) than the category (26.43 per cent) and the benchmark (29.17 per cent).
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It has close to 90 per cent exposure to CRISIL-defined large-cap stocks over the last one year. Traditionally, large-cap stocks tend to be more stable than mid-cap ones during the times of market volatility.
Portfolio diversification
The fund remains well diversified, with an average of 57 securities in its portfolio for a three-year period. Portfolio concentration, defined as the relative proportion of individual stocks and sectors, is an important parameter in the methodology used by CRISIL to assess risk mitigation in portfolio construction for a mutual fund.A combination of risk-adjusted returns and portfolio-based parameters makes CRISIL’s proprietary ranking methodology unique.
Investment style
An analysis of the portfolios over the past three years reveals that the fund manager has taken active cash calls in reaction to volatility in markets. During the 2008 calendar year, when the equity market was going through a tough phase, the fund had maintained an average equity exposure of around past 80 per cent.
It had reduced equity exposure to as low as 71 per cent in November 2008. Once markets recovered in April 2009 and volatility began to ease towards mid-2009, the fund steadily increased its equity investments. Since then, the average equity exposure maintained by the fund measured 91 per cent till November 2011.
A look at the fund’s sector holdings over a three-year timeframe reveals that it had the highest exposure to banking (Rs 16 per cent) followed by software, petroleum products, power and industrial capital goods, with exposures in the range of six-eight per cent.
CRISIL Research