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Birla Sun Life MIP II - Wealth 25 Plan is a debt-oriented hybrid fund and has been ranked in the top 30 percentile (CRISIL Mutual Fund Rank 1 or 2) since December 2013. Managed by Satyabrata Mohanty and Kaustubh Gupta, the fund’s primary objective is to generate regular income to make monthly payments or distribution to unit holders and secondly, growth of capital. Its quarterly average assets under management stood at Rs 880 crore on June 30, 2015.
MPIs or monthly income plans are broadly classified into two categories – MIP aggressive and MIP conservative.
Funds with an equity allocation between 15 per cent and 30 per cent are classified as aggressive by CRISIL, while those with an equity allocation lower than 15 per cent are termed conservative.
The risk profile of the fund falls between that of a pure debt fund and a balanced fund (greater than 65 per cent allocation to equity). This is beneficial to investors looking for a small equity exposure with stable monthly returns. The high debt component seeks to provide the necessary stability in returns.
Superior performance
The fund has given compounded annual growth rate returns of 10.27 per cent since its inception in May 2004 and has consistently outperformed its benchmark (CRISIL MIP Blended Fund Index) and the category (schemes defined under CRISIL Mutual Fund Ranking – MIP Aggressive Category) across various time frames.
Even on a risk-adjusted basis, it has performed well as reflected in a higher Sharpe ratio of 2.13, compared with the category’s 1.63 and the benchmark’s 1.13 over the past three years ended July 20, 2015.
During the same period, the fund had a Jenson Alpha (a risk-adjusted measure of excess returns over market returns) of 7.97 per cent compared with the category’s 3.48 per cent.
Consistent dividend payouts
Over the past three years, the fund has distributed dividends in all 36 months, indicating consistency in terms of regular dividend payouts. The average monthly dividend yield over this period is 0.48 per cent.
Duration management
The fund has actively managed the interest rate risk compared with its peers. It increased the portfolio’s modified duration when interest rates were expected to fall and vice-versa. For instance, when 10-year G-sec yields hardened from 7.58 per cent to 8.96 per cent during the June-September 2013 period, the fund reduced its modified duration from 3.09 years to 2.48 years. In this period, the fund posted absolute returns of -1.45 per cent vis-à-vis the benchmark’s -4.87 per cent and the category’s -2.28 per cent.
Subsequently, when interest rates were on a downtrend, the fund increased its modified duration to 6.01 years in October 2014 (versus the category’s 4.40 years) from 5.52 years in June 2014. During the same period, 10-year G-sec yields softened from 8.93 per cent to 8.45 per cent. In this period, the fund delivered absolute returns of 11.22 per cent vis-à-vis the benchmark’s 6.69 per cent and the category’s 7.99 per cent.
Portfolio analysis
During the past three years, the fund had an average 64 per cent exposure to debt, 29 per cent to equities, and the remaining to cash and cash equivalents. The fund maintained the highest average equity exposure vis-à-vis the category’s average of 21 per cent during the period.
The debt portfolio is well guarded in terms of credit risk as a result of investments in the highest-rated debt papers (AAA/P1+) and government securities. During the past three years, 74 per cent of the debt portfolio is invested in these papers and the remaining in below AAA papers (include A/AA papers).
Crisil Research
