When winning is a habit

FUND PICK: HDFC Long Term Advantage Fund

The fund negotiates bull and bear markets with equal ease.

HDFC Long Term Advantage Fund was launched in December 2000. The fund charges an entry load of 2.25 per cent for investments up to Rs 4.999 crore.

The fund's performance has seen its corpus increasing 12 times in the past two years. Winning is a habit for the fund and 2004 was no exception.

With a 46.47 per cent return, it ranked third in its category. It managed the first half of 2004 well when markets tanked and posted smart gains in the bull run thereafter.

When the equity markets turned sour in January 2004, the fund negotiated the period quite well - it lost 5.28 per cent as compared to the category's average loss of 5.44 per cent. A low exposure to tech stocks of an average 5 per cent helped the fund limit its losses.

The next quarter was extraordinary. The fund survived the May stock market debacle and ended Q2 2004 down only 0.25 per cent, while its average peers bled, losing an average 9.22 per cent. A high exposure to mid- and small-cap stocks helped the fund move past the tough period.

Consider this: in the second quarter, the Sensex was down over 14 per cent while the fund did better than the 5 per cent loss of the CNX Midcap Index.

The fund increased exposure to tech stocks marginally in the quarter and gained from the rally in the sector.

In the next two quarters, too, it did well and emerged a winner. So far this year (as on April 1, 2005), the fund has returned 0.47 per cent to underperform the category's average return of 3.22 per cent.

Starting as a large-cap oriented fund, it soon realised the potential of mid- and small-cap stocks and increased weightage to these scrips in August 2002. The strategy clicked as mid-cap stocks rallied in 2002.

The fund ended the year as the hottest fund in the category. After mastering the art of managing volatility that comes with smaller companies, it was time to enjoy the fruits and the fund did exactly that in 2003 and 2004. 
 

Top holdings
As on March 31, 2005	Value  (Cr)	Net  Assets  (%)
Goodlass Nerolac Paints	6.91	7.45
Concor	5.20	5.61
Paper Products	4.60	4.96
Bharat Electronics	4.34	4.68
Carborundum Universal	4.27	4.60
Alfa Laval (India)	4.15	4.48
Vesuvius India	4.10	4.42
Berger Paints India	3.74	4.03
Shanthi Gears	3.28	3.54
Orient Abrasives	3.04	3.27
Hero Honda Motors	2.74	2.95
SBI	2.49	2.68
Thermax	2.42	2.60
Siemens	2.38	2.57
Glaxosmithkline Con. Health	2.36	2.55
Vimta Labs	2.27	2.44
Maharashtra Seamless	2.17	2.34
BPCL	2.12	2.29
Asahi India Glass	2.10	2.27
Balkrishna Inds	2.06	2.22

It increased its exposure to mid- and small-caps to over 80 per cent and ended the two years as the third best-performing fund in the category.

The fund is yet to see a prolonged bear phase. Yet, it is a strong contender for all sorts of portfolios.

-Value Research

Returns in % as on April 7, 2005

Income funds continue to provide weak returns as the bonds market remains nervous amid fears of rising interest rates. 
 

Debt categories Average category returns
	1 month	1 year
Ultra short-term institutional	0.44	4.84
Floating rate	0.43	4.80
Short-term institutional	0.48	4.66
Ultra short-term	0.41	4.54
Short-term	0.44	4.31
Gilt: short-term	0.29	2.50
Gilt: medium-term	0.20	0.87
Medium-term institutional	0.12	0.59
Speciality	0.01	0.22
Gilt: medium and long-term	-0.3	-1.3

Global interest rates, robust credit off-take and higher government borrowings projected for this year are keeping bonds subdued. 
 

Leaders Regular income funds (growth)
	1 month	1 year
Prudential ICICI LTP Cumulative	0.36	10.17
Libra Bond Fund	0.08	9.61
Escorts Income Fund	0.43	3.84
Sundaram Income Plus	0.46	3.19
Can Income Scheme	0.32	3.01
BoB Income Fund	0.37	2.91
Franklin India International	-0.51	2.54
Reliance Income Fund (Retail)	0.19	1.98
SBI Magnum NRI Investment	0.83	1.59
Grindlays SSIF - MTP	0.4	1.46

Over the last month, income funds on an average gave returns on 0.12 per cent. 
 

Laggards Regular income funds (growth)
	1 month	1 year
Principal PNB Debt	0.14	-4.71
Birla Bond Index fund	-0.12	-1.43
Grindlays SSIF - Investment Plan	0.27	-1.42
Sundaram Bond Saver	-0.21	-1.17
SBI Magnum Income	-0.06	-1.12
Birla Income Plus	0.10	-1.12
Chola Triple Ace	0.07	-0.76
Templeton India IBA	0.42	-0.64
Tata Income Plus - RIP	-0.02	-0.52
HDFC HIF	0.23	-0.47
Source: www.mutualfundsindia.com

Baring some exceptions like Prudential LTP and Libra Bond Fund (the top two performers over the last one year) which managed minuscule amounts of less than Rs 2 crore, others gave returns far less than the bank savings rate or slipped into the negative territory