DWS ALPHA EQUITY
After a top quartile performance for three years, the fund found itself in the bottom quartile in 2009. But investors should not be in a hurry to write it off.
Fund manager Aniket Inamdar maintains a compact portfolio and limits his mid- and small-cap exposure to around 25 per cent of the portfolio.
With the number of stocks ranging from 20 to 31, one can expect concentrated stock bets. The top 10 holdings of the fund account for around 57 per cent of the portfolio. Though allocation to a single stock has exceeded nine per cent on many occasions, it is only in the large-cap bets.
The fund appears to follow a mixed strategy. While a few of the large-caps have been held since inception, a fifth of its portfolio comprises stocks held for five months or less. Inamdar says he doesn’t churn the portfolio a lot; it is the range-bound market that has resulted in a higher than normal turnover ratio.
Despite the blip in performance last year, the fund has established a decent track record that makes it a worthy pick in this space. Its five-year annualised return of 22 per cent is higher than that of the category average (18 per cent) and the benchmark (18 per cent), as on August 31.
| Trailing Returns | |
| Period | Return (%) |
| 3-month | 13.63 |
| 6-month | 16.50 |
| 1-year | 21.62 |
| 3-year | 11.70 |
| 5-year | 21.90 |
FRANKLIN INDIA BLUECHIP
An excellent pick for investors who want to beat the Sensex over the long term without taking undue risk. By and large, this fund delivers returns superior to the category average and occasionally astounds, catapulting it to the top slot.
Fund manager Anand Radhakrishnan is focused on long-term value and does not follow the crowd or play the momentum game. During the 2008 downturn, his cash exposure averaged just five per cent. So, periods of relative under-performance will come with the territory but are not a reflection of the fund’s character.
Radhakrishnan believes that given the low penetration of banking and financial services in the country, companies in this sector have huge growth potential.
Last year, the fund’s return of 84 per cent (category average, 73 per cent), placed it in the third spot among the 46 funds in its category. It benefited from its exposure to financial services and high equity exposure when markets took a U-turn in March 2009. The 25 per cent exposure to mid-caps (March 2009) helped. Radhakrishnan invests primarily in large-caps (market cap of the top 20 per cent of the CNX 500). Depending on his fundamental views, he might sometimes look at mid-caps with a market capitalisation close to that of large-caps as well.
| Trailing Returns | |
| Period | Return (%) |
| 3-month | 13.06 |
| 6-month | 15.40 |
| 1-year | 30.15 |
| 3-year | 13.37 |
| 5-year | 21.80 |
In a nutshell, have a medium to long-term perspective with this fund and you won’t be disappointed.
SUNDARAM BNP PARIBAS SELECT FOCUS
After a fabulous run for five years, the fund stalled in 2008 and faltered in 2009. Nevertheless, we still believe it’s a good offering.
This concentrated and aggressive fund anchors itself in sectors or themes it believes to be most promising and then bets on a few stocks. Its compact portfolio has held less than 20 stocks at some points and only occasionally crossed 30. By and large, it has gone with around 28, since its mandate limits it to 30. Despite a concentrated portfolio, its fall in 2008 was not particularly appaling. It fell slightly more than the category average and almost equalled its benchmark’s (Nifty) returns.
A readiness to flee to cash is what cushioned the downturn. The fund manager, Srividhya Rajesh, takes aggressive cash bets when the need arises. Rajesh started to increase the cash exposure right from the start of the market crash in January 2008 and averaged around 26 per cent up to March 2009.
| Trailing Returns | |
| Period | Return (%) |
| 3-month | 13.45 |
| 6-month | 12.66 |
| 1-year | 16.20 |
| 3-year | 10.38 |
| 5-year | 21.50 |
On the face of it, a concentrated portfolio does make for a more risky bet. However, if it was rooted solely in large-caps, the risk would be mitigated to some extent. But that’s not always the case. In 2009, exposure to mid-caps rose to 34 per cent (November).
In 2009, investors were disappointed when it underperformed both the category average and the benchmark. In fact, it was the worst hit among all large-cap funds. However, overall, this actively managed portfolio has rewarded its investors.
