We like this fund for its ability to achieve consistent risk-adjusted returns across market cycles. A well-diversified portfolio of quality stocks helps this fund maintain its performance edge irrespective of the market movement.
This fund adopts a top-down approach by evaluating economic trends and analysing various sectors before it invests in both value and growth stocks. This has helped the fund during phases when the markets were volatile, such as 2004 and 2008, when it managed to protect the fall better than its benchmark. The fund manager maintains an average equity allocation of 93.65 per cent and increases cash exposure during market downturns.
The fundís allocation to mid-cap stocks acts as the catalyst for better performance during bull years. During the bull run of 2003-07, the mid-cap allocation was over 35 per cent, which was one of the reasons for the fundís good performance as mid-caps made huge gains during this period. The mid- and small-cap allocation over its 14-year history has defined what category this fund fits in. In 2001, the high mid-cap allocation resulted in this fund being classified as large- and mid-cap fund. However, in 2006, the reduction in large-cap allocation resulted in the fund being reclassified as multi-cap.
It has been an outperformer for a long time but its recent performance has not been spectacular. It had a good run from 2003 to 2009 when it was consistently in first or second quartile. In the past two years its returns have been marginally above its peers and its benchmark, S&P CNX 500.
The portfolio consists of stocks such as RIL, SBI, Infosys, Grasim, ITC, BPCL and HUL which resembles DSPBR Top 100 equity fundís portfolio.
A cause of concern is the high portfolio turnover of 206 per cent as on June 30, 2012, which is high compared to peers. Moreover, in recent years, this fundís portfolio has had around 70 stocks, which is way more than the category average of 40. The high turnover also eats into the performance, which could be attributed to its indifferent performance in the past two years.
Why invest? This fund has the potential to handsomely reward investors staying for the long-term. In its history of 14 years, this fund has underperformed the category average only on three occasions, making it a compelling pick.