We like this fund for the fund managerís conviction that has paid rich dividends in the long-run. Consistent outperformance has resulted in its assets swelling to almost Rs 10,000 crore.
It predominantly invests in medium- to large-sized companies which are likely to achieve above-average growth, enjoy distinct competitive advantages and have superior financial strengths. Stocks such as SBI, Infosys, Crompton & Greaves, Alberg Software, Indo Rama Synthetics (India) and Zee Entertainment Enterprises have frequently been picked by the fund manager. The fund manager maintains an average portfolio of 60-65 stocks, with SBI finding the highest allocation of almost 10 per cent, with no other allocation going past the 7 per cent mark. The conviction to stay invested in the financial sector irrespective of market movements can impact the performance of this fund in the short-run. Likewise, the fund manager stays invested in stocks with a long-term view, which is also reflected in its low portfolio turnover.
This fund boasts of an impressive track record, but the past two years have been somewhat less than impressive. In the long-run, only on four occasions this fund has underperformed the category average, which is impressive. The fund has been a top quartile performer in 13 out of 16 years since its launch. It has increased exposure to mid-cap stocks, but has maintained its risk profile, which has aided the performance. However, during short time-frames, this fund has trailed its peers; either due to conservative stock selection or lower exposure to sectors that favoured the markets. For instance, in 2007, this fund trailed the benchmark during the infrastructure rally. But the conviction to stay away from infrastructure helped it contain losses subsequently. Likewise, the conviction to stay invested even during the market fall of 2008 compared to its peers helped this fund outperform the benchmark significantly in 2009. Though a multi-cap fund, it was a large- and mid-cap fund prior to 2009 because of 70-80 per cent allocation to large-cap stocks.
Impressive track record and the least expensive fund scheme in its category with 1.78 per cent expense ratio are some of the factors that make this fund an automatic choice to invest in.