BIRLA SUN LIFE FRONTLINE EQUITY PLAN A
The fund targets the same sectoral weights as the BSE 200, subject to the flexibility of selecting stocks within a particular sector to generate long-term capital growth, income generation and distribution of dividend. In its eight-year history, the fund has underperformed only once, in 2003, compared to its benchmark, but it started outperforming its category average only from 2006. This is largely attributed to Mahesh Patil taking over as manager in November 2005.
The performance during market upswings has been mixed. The large-cap focus has limited its ability to benefit from rallies led by mid-cap stocks, but its ability to change track quickly in sync with market trends provides a higher salve.
In 2009, it delivered 90.45 per cent, when the category average was 80.19 per cent. “We got into good quality stocks at distressed valuations. We also bought into certain stocks when the de-leveraging story began to play out and firms were able to raise money as liquidity eased,” says Mahesh Patil, head of equity—domestic assets, at Birla Sun Life Mutual Fund. While Patil does adhere to this strategy, there have been deviations.
A long-term track record of good performance and proven ability to ride out corrections, with a focused exposure to blue-chip equities, makes the case for this fund. Over the past five years, it has delivered an annualised return of over 23 per cent, placing it among the top funds in the category. That it is among the few to have bettered their respective benchmarks each year in the past five years also adds to its appeal.
CANARA ROBECO EQUITY DIVERSIFIED
This scheme follows a bottom-up investment style, by identifying companies with a strong competitive position, in good businesses with quality managements.
This seven-year fund underwent a makeover in 2007 and has not looked back since. In its earlier days, its erratic portfolio had a distinctive mid-cap tilt. Since 2007, the fund began to take a distinctive large-cap bias and the portfolio began to stay consistently diversified. Consequently, it has beaten its peers in market downturns and upturns. At the end of 2010, the three-year annualised return was 4.6 per cent, compared to the negative returns of its benchmark, the BSE 200.
A great believer of the consumption story, Shah added FMCG stocks to the portfolio last July, a sector missing till then, while reducing exposure to financial services. While stocks like Bharti Airtel, HDFC Bank, BPCL and BHEL have been consistently part of Shah’s portfolio, the manager tends to book profits in stocks that are fancied by the market during rallies. Evidence to this fact is that its portfolio turnover and pruning are prevalent only in a select set of stocks that witnessed sharp market interest at that point in time.
The fund primarily invests in bigger stocks and, to prop up its returns, will opt for mid- and small-cap stocks to a maximum exposure of around 25 per cent of the assets. Besides delivering well during market upturns, the fund has also proved its worth during market meltdowns.
FIDELITY EQUITY
Though the fund’s investment mandate is one of a “go-anywhere” kind in terms of market-cap and sector allocations, in practice it sticks to a large-cap orientation. Ever since launch, Kothari has allocated over 65 per cent to these. Among sector plays, his preference for banking is obvious.
The fund’s popularity shot up after its performance in 2008, when it was among the few that managed to contain downsides despite being fully invested. The large-cap bias that came to its aid proved to be the chink in its armour when the market began rallying in March 2009 and mid-cap and small-cap stocks galloped ahead. Such market movements do not hinder Kothari’s individual style. “The investment process does not start with a market cap bias,” explains Kothari. “While looking at various investment options, I keep the liquidity risk in mind. While I do not bucket investments in mid- or large-cap, if I get 30 per cent returns without taking liquidity risk and a mid-cap offers 40 per cent return, I would opt for the larger-cap company.”
Kothari has been known to invest in stocks that are less popular among his peers and hold on to these for the long term. “Understanding how the business makes money, what is the scalability of the business, what is the management’s track record and execution capability and the value we should pay for such business are the key elements of my investment process,” he says.
What you can expect is a diversified portfolio, low individual stock bets and no undue risks, with a clear focus on bottom-up stock picking and comfort in valuations.
