Intelligent churners
02/05/2010
DSPBR EQUITY
Consistency is the virtue of this fund. Though benchmarked against the Nifty, it’s not a pure large-cap holding. In the past, it had actively changed its complexion from being a large-cap to a mid-cap holding, depending on market conditions. In its long history, the large-cap allocation has wavered from 89 per cent to 39 per cent. But, ever since Shah took over in 2006, he aims for a 50 per cent large-cap tilt. The outcome is a rigorously diversified offering. Allocation to the top three sectors remains below the category average. Gone are the days when the portfolio held just 22 stocks, with the top 10 holdings accounting for nearly 75 per cent. Under Shah’s management, single-stock allocation has never crossed five per cent, barring a few large-caps. Out of the 87 stocks in its portfolio, 50 have an allocation of less than one per cent. Shah actively churns his portfolio. Shah handled the market rally in 2007 and the market crash in 2008 very well. But, when the market began to rise from March 9, 2009, onwards, he was caught unaware. It took him a while to lower cash allocation and neither did he go heavy on construction, metals or financials, which boomed during that time. As a result, the fund lagged. “With a defensive portfolio, we could not catch the market turnaround; hence we underperformed from March to June. Then we repositioned our portfolio to look at growth.” It worked. In 2009, he outperformed the category average yet again. The charm of this multi-cap player lies in the fact that it has impressed in all market conditions.
RELIANCE REGULAR SAVINGS EQUITY
In its short history, this one has made its mark. Its annual and trailing returns are amazing. Omprakash took over in November 2007 and wasted no time in changing the complexion of the portfolio. The fund has excelled since. Exposure to construction shot up to 28 per cent, with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects. Exposure to engineering was yanked up (18.5 per cent), while financial services lost its prime slot (dropped to 6.69 per cent) and auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average, 25.7 per cent). When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But, even its high cash allocations could not cushion the fall. The fund manager attempts to capitalise on valuation differentials between mid- and large-cap stocks, which at times can result in aggressive churning. This fund started off as a large-cap fund but resembled a pure mid-cap offering by the end of 2007. Since January 2009, it took on a distinct large-cap tilt, which it maintains till date. Had Omprakash opted for a greater mid-cap exposure, he might have delivered even higher than 102 per cent (2009). Right now, he is adopting a more cautious approach, a wait-and-watch strategy to see how interest rates pan out and how inflation is dealt with. As assets have risen, so have the number of stocks. And, while you may see strong sector bets, he plays it safe with individual stocks.
UTI DIVIDEND YIELD
This fund has successfully navigated through good and bad times. The mandate demands an investment of at least 65 per cent of the portfolio in equity shares that have a high dividend yield at the time of investment. A look at the track record makes one wonder whether the fund manager follows this principle diligently. Its impressive performance in 2007 was because Kulkarni hopped on to the energy and metals bandwagon by re-entering Tata Power and adding RIL, SAIL and Tata Steel. That year, the BSE Power, BSE Oil & Gas, and BSE Metals all delivered handsomely. The objective is best suited to those who want decent returns with good downside protection. Its fall in 2008 was less than that of the Sensex, as well as the category averages of the multi-cap and dividend yield categories. Of course, allocation to debt and cash also contributed to cushioning the fall. Come 2009 and the fund faltered, because Kulkarni began to seriously up the equity allocation only from June 2009 onwards. But, what has always worked for this fund is smart bottom-up stock picking and sector allocation. By doing that, Kulkarni managed to marginally outperform the Sensex and the other two categories in 2009 as well. She gives credit to “ good stock picking in IT, consumer, engineering and metal sectors”. The intrinsic nature of this portfolio is to pick up good dividend yield stocks, which bring support on the downside. However, using a multi-cap strategy, she has put to rest the notion that dividend yield funds can only impress during market downturns.
