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Biggest of them All

Reliance Natural Resources has emerged as the largest equity fund in terms of AUM. Here's why

Three months after its launch in January 2008, Reliance Natural Resources Fund has emerged as the India's largest equity fund with assets under management (AUM) of Rs 5,589 crore (April 2008). The fund overtook ICICI Prudential Infrastructure Fund which topped the charts in March with an AUM of Rs 5,390 crore. It was not too long ago that the AUM of Reliance Mutual Fund touched Rs 1 lakh crore.

In January 2008, when most investors refrained from investing and fund houses had a tough time mobilising funds, Reliance Natural Resources managed to collect a whopping Rs 5,660 crore. It was the second largest collection by an equity mutual fund; the top place occupied by another Reliance family member - Reliance Equity, which mobilised Rs 5,790 crore in 2006.

The equity funds from the Reliance stable do not hesitate from taking aggressive cash calls. This fund is no exception as the fund currently maintains extremely high cash levels. Though the cash component decreased in April to 53 per cent from March levels of 62 per cent, the fund manager is still waiting for the right opportunity to invest in stock markets. The fund's AUM has eroded by Rs 71 crore since launch but the high cash strategy helped the fund protect the downside. The fund posted a positive return of 0.5 per cent since February 26, 2008 (first NAV date), at a time when the average return of the equity diversified funds has been (-) 6 per cent (February 26 - May 8, 2008).

Looking at the portfolio, various large cap stocks like Reliance Industries, ONGC and ACC have been included. However, the fund is quite keen on diversifying by investing in securities abroad. As per its mandate, the fund can invest up to 35 per cent of its assets in foreign securities. The exposure to such stocks has been increased in a short span and close to 7 per cent of its assets account for such foreign securities. Though the investment in such assets is small, the fund manager has selected companies like Arcelor Mittal (world's largest steel producer) and Freeport McMoRan Copper & Gold (world's largest publicly traded copper company). The fund's maximum international investment is in companies engaged in the global water industry. This investment is through PowerShares Water Resources ETF, a water index based international ETF.