Launched in November 2006, DSP BlackRock Small and Midcap Fund is an equity fund with assets under management of Rs 1,186 crore as on October. The fund, which is jointly managed by Apoorva Shah and Anup Maheshwari. It has been ranked Crisil Fund Rank 1 over the last three quarters till September under the Small & Midcap equity category, representing very good performance vis-à-vis category peers. The consistency in its ranking showcases a blend of superior performance and disciplined portfolio management by the fund manager.
Performance
During the initial years post its launch, the fund’s performance was subdued. For the first two years till September 2008, the fund gave a negative return of 7.14 per cent as compared to its benchmark, i.e., CNX Midcap, which fell by 1.41 per cent. Post this period, the fund has been a clear out performer with 45 per cent annualised returns for the period September 30, 2008 till November 19, as compared to annualised returns of 34 per cent and 31 per cent, returned by the CNX Midcap index and peers, respectively, over this period. While the near-term performance (one month and three months) of the fund is not exciting, over the recent one-year, the fund has returned 42 per cent vis-à-vis 30 per cent and 32 per cent by the CNX Midcap index and peers, respectively. An investment of Rs 1,000 in the scheme since its inception would have almost doubled to Rs 1,926 as on November 19, 2010, vis-à-vis Rs 1,830 in its benchmark index and Rs 1,544 in its peer average.
Risk
The fund’s strong performance on returns has been complimented by a lower volatility vis-à-vis its peer average as well as the benchmark index. The superior performance of the fund on a combination of returns and risk, relative to its peers, is a key factor in propelling its performance to Crisil Fund Rank 1.
Portfolio diversification
The fund has always maintained a well-diversified portfolio since inception with the number of stocks ranging from 60 to 80. Also, as per the latest portfolio (October), the fund’s top 10 holdings constituted about 25 per cent of the portfolio size, indicating lower concentration.
DSP BlackRock Small and Midcap Fund was in the topmost cluster on both sector concentration and company concentration parameters as per Crisil Mutual Fund Rankings for the quarter ended September 2010, indicating low concentration risk.
Investment style
The portfolio consists largely of small and mid-cap stocks, i.e. those beyond the top 100 stocks by market capitalisation. The investments into such companies are made on the presumption that these companies would increase their earnings and grow into larger and valuable companies going forward. However, investors would do well to note that there is an inherent risk of some of these companies not meeting expectations. Also, such stocks display greater volatility as well as may be less liquid than larger cap stocks.
Crisil’s analysis further reveals that the fund has always preferred to stay close to fully invested. Since inception, the fund has an average of 92 per cent of its portfolio invested into equities. In the beginning of 2009, when the BSE Sensex had tested the 8,000 levels, the fund’s exposure to equities was almost 90 per cent as compared to 77 per cent by its peers. Thus, when the markets rebounded from these levels, the fund was at an advantage of being relatively more invested into equities.
Among sectors, consumer non durables has been the most favoured, followed by pharmaceuticals and information technology.
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