ICICI PRUDENTIAL INFRASTRUCTURE - A GOOD PICKER
The highest alpha generator in the category, its returns have impressed. Though launched in August 2005, it emerged as a strong contender only since 2007, when its back-to-back annual performance put it ahead of its peers.
It beat the category average in 2006, but was the best performer in 2007 and 2008. It topped the category in 2007 (92.92 per cent) and fell the least in 2008 (-51.64 per cent). In the first quarter of 2009, it actually delivered 1.27 per cent (category average: -5.32 per cent). It also has the highest 3-year annualised return (20.74 per cent) among infrastructure funds (as on May 31, 2009).
In 2008, the fund made the right moves. It hiked its exposure to large-caps, to average at around 77 per cent. But its ability to contain the downside was helped in a large way by the heavy debt exposure and the liberal use of derivatives.
Portfolio-wise, the fund increased exposure to financial services between September 2008 (9.3 per cent) and December 2008 (23.26 per cent). Between April and May, it has dropped from 17 per cent to 10.7 per cent. During these two months, allocation to energy has been upped from 15 per cent to 20.65 per cent.
This fund includes every sector, barring FMCG, media, infotech and pharma. Though the portfolio looked a little bloated last year, this year it has averaged at around 40 stocks. The fund manager rarely bets more than 25 per cent on a single sector and more than 8 per cent on a single stock, barring a few large-cap names.
TATA INFRASTRUCTURE - UNCOMMON OUTLOOK
Though not a stellar performer, it has impressed. In the first year of its launch (2005), it underperformed in all the three quarters it completed. But since then, it has managed to beat the annual category average every year, with its best performance in 2006, when it got ranked second in its category with a return of 60.32 per cent (category average: 54.20 per cent).
More From This Section
In 2008, the fund hit a rough patch, despite making the right moves: being high on cash and debt, with a prominent large-cap exposure. From June 2008, this fund also took a substantial exposure to derivatives, but underperformed the category average in the last two quarters of 2008.
But there are numerous occasions when the fund manager hit home runs with his sector bets. The rally in construction and basic engineering in 2006, where the fund held an average exposure of 52 per cent, for instance. In the first quarter of 2007, when the BSE Metal index was down 6 per cent, the fund manager picked up metal stocks and kept increasing exposure to these till it touched 16.29 per cent (December 2007), higher than the category average of 13 per cent.
The BSE Metal index returned 121 per cent that year. In 2008, he dropped exposure to financial services between January (15.06 per cent) and May (8.56 per cent), as the sector was badly hit that time. But then changed his stance and it touched 23.29 per cent by December 2008. The BSE Bankex delivered nearly 10 per cent in the July-September quarter and was amongst the least hit indices in the October-December quarter.
The fund’s portfolio has never gone below 44 stocks, but on numerous occasions has crossed 60. And single stock allocation has been circuited at seven per cent. Right now, the fund manager is betting on financials, energy and engineering.
UTI INFRASTRUCTURE - PIONEERING POSITIVES
Besides being its initiator, this fund has more than proved the merit of this theme. It got off to an impressive start by beating its only other peer — DSP BlackRock T I G E R in 2005. In 2006, was the best performer in the entire universe of equity funds.
In 2007, allocation to construction dropped from 21 per cent to 15 per cent, despite this sector rallying. His exposure to metals hovered below the category average. The trade-off? It had to let go of its prime spot but still managed to deliver a return of 72 per cent that year (category returns: 82.83 per cent).
In the downturn that immediately followed, the fund began to reduce its equity allocation, much in line with its peers. No one emerged unscathed out of 2008 and this one shed 56.32 per cent, a lot less than many other funds and a little less than the category average of -60 per cent.
This year, his call on cash has resulted in mixed results. In the first quarter of 2009, its equity allocation hovered around 61 per cent, way below the category average. This move paid off and resulted in the fund shedding a mere 0.93 per cent in the first quarter of 2009. But then the market began to rally and hit the fund, whose equity exposure for April stood at just 67 per cent. Consequently, though the category delivered 81.74 per cent (March 9-May 31), the fund returned a much lower 60 per cent.
The fund manager typically adheres to a buy-and-hold strategy, with his favourite picks being BHEL, RIL, L&T and Bharti Airtel. Individual stock holdings have never crossed seven per cent, barring Reliance Industries Ltd. This fund is pretty much as close as you can get to a pure infrastructure play.