Though returns continue to impress, swelling size of the fund is a cause of concern. For a mid-cap fund, the ability to take aggressive positions in small stocks gets diluted with increasing size
19-Jun-2007 •Research Desk
The largest mid-cap fund with asset under management of over Rs 3,776 crore, Reliance Growth has been beating its peers by an impressive margin for the past so many years.
After the 2001 dotcom crash, the fund has made a smart comeback in 2002 with a return of 55.75 per cent, the second-best among the 59 funds. Since then it maintained a top quartile position for the next four calendar years. However, in 2006 the fund was ranked 53 among 145 with a return of 41 per cent.
While the fund's allocation to large-, mid- and small-caps keep oscillating, over the past one year, the exposure to small-cap stocks has increased from around 15 per cent to around 22 per cent.
In the past, the fund followed a strategy of buy-and-hold for some stocks while in some it has gone for a quick profit taking. It is well known for its smart moves. In 2001, the fund maintained a higher exposure to PSU and technology stocks. The holdings in FMCG stocks helped the fund generate second-best return in its category in 2002. Following the rally in bank and auto stocks in 2003, the fund increased exposure in both sectors.
Over the past six months, this fund has increased exposure in metals, while paring holdings in engineering, technology and financial services. The metals and metal products now account for over 12.5 per cent of the fund's AUM.
However, being a mid-cap fund, Reliance Growth's huge asset size remains a concern. For a mid-cap fund, the ability to take aggressive positions in small stocks gets diluted with increasing size. As of now, the fund boasts of one of the most enviable performance records. But to remains to be seen whether it can continue to do so with its huge asset base.
The fund had shut its doors to fresh investments in April last year. But in August 2006 it again resumed taking in fresh investments.