It's different

FUND PICK: Tata MIP

This is one fund that will never give you sleepless nights. And that's because it neither takes aggressive equity positions (capped at 10 per cent), nor makes big interest rate calls on its debt portfolio.

However, despite its cautious investment style, the fund has always been able to deliver above-average returns. In the volatile eight months of 2004, it's up 1.07 per cent against the category's average returns of 0.64 per cent.

The fund's volatility, however, has been on the higher side, especially due to a high portfolio turnover and a focus on mid-caps. Except for a few stocks like ACC, Crompton Greaves, GE Shipping, Tata Tea and Lupin, the fund has not held stocks for more than three-four months.

Its higher allocation to mid-caps turned out to be fruitful in 2003 when it posted second-best returns in the category - up 18.65 per cent. However, this year, the fund has stressed more on large-caps which are expected to reduce its volatility.

On the debt side, the fund has focused on gilts and AAA-rated bonds. During the mid-year rally in 2003, it gained on the back of higher gilt allocation (average 50 per cent). However, with volatility taking the centre stage in 2004, it has invested more in AAA-rated corporate bonds to earn a higher coupon income.

Though the fund has managed its debt portfolio with caution, it has turned a bit aggressive at times which has led to minor blips in its returns. For instance, in Q12004, it kept a higher average maturity of 2.7-3.7 years, thus under-performing the category. But the subsequent months the fund's low maturity helped contain losses.

However, in recent months, it has built up a huge cash position of over 30 per cent. Since its equity allocation is touching its limit (9.61 per cent), the only option is to deploy the cash in bonds. But with the expectation of a rise in bond yields, holding on to cash is not a bad idea. 
 

Top holdings
As on Sep 30, 2004	Value  (Cr)	Net  Assets  (%)
Treasury bills	139.17	37.72
Reliance Industries	26.16	7.09
GoI 05/04/2009 6.65%	25.61	6.94
GoI 30/08/2008 11.4%	21.30	5.77
SBI	16.15	4.38
Export-Import Bank	14.93	4.05
GoI 07/04/2009 11.99%	12.29	3.33
HLL	10.06	2.73
Tata Consultancy Services	7.89	2.14
GoI 10/04/2009 11.68%	5.44	1.48
IRFC	5.35	1.45
Grasim Industries	5.29	1.44
LIC Housing Fin.	5.11	1.39
Others	4.49	1.22
Infosys Technologies	2.41	0.65
Raymond	2.01	0.55
Ballarpur Inds.	1.89	0.51
Tata Tea	1.72	0.47
National Aluminium	1.49	0.40
Grasim Industries	1.35	0.37

The fund has been one of the top-performing MIPs in the past few years and is suited to those who don't want to take higher risk. Its volatility is expected to fall as it has a large-cap orientation and a low maturity profile.

- Value Research