Great ability to spot sector trends

FUND ANALYSIS/ Tata Infrastructure

Another fire cracker from the infrastructure theme, Tata Infrastructure returned an awesome 60.32 per cent through 2006 to emerge as the third best performing diversified equity fund. For the NFO investors, the fund has delivered an absolute return of 196 per cent in two and a half years.

The fund achieved this essentially on the back of a large-cap growth-oriented focus, with some help from the mid caps. One can attribute this stellar performance also to the broad infrastructure theme. But the real clincher has been the fund manager's ability to spot sector trends which have buffered the returns of the fund.

For instance, before the markets tanked in May 2006, the fund manager had cut back his exposure to financial services. The move was profitable, because the sector was amongst the biggest losers in the bear phase that ensued.

By February 2007 the fund manager re-entered the sector, timing the entry rather well, because through the June 2007 quarter (April-June) this sector delivered phenomenal returns. Similarly, the fund's timing in the metal sector was flawless. These two significant calls have translated into a 23.3 per cent return in the June 2007 quarter compared to the category's 16.88 per cent return.

The strategy has its share of pitfalls too. The March 2007 quarter was disastrous, for the fund lost (-) 8.26 per cent compared to the category loss of (-) 5.93 per cent.

The fund is definitely not for the faint hearted. Unlike most other core funds, Tata Infrastructure clearly has no sector loyalty and it takes aggressive positions.