VR Logo

Young Achiever

In its short life, Fidelity Tax Advantage has managed to consistently shine over its category. Here’s how

The prospectus of Fidelity Tax Advantage says that the fund aims to generate long-term capital growth from a diversified portfolio of predominantly equity and equity related securities. The fund has no capitalization and sector bias and has been benchmarked against the BSE 200 index.

In its brief existence of two years, Fidelity Tax Advantage has given handsome returns and has been an above average performer amongst the tax planning funds. The fund has beaten the category average in both the years and posted returns of 59 per cent in 2007, three per cent more than the category, but below the benchmark by a small margin on one per cent.

Fidelity Tax Advantage’s strategy differs from most tax planning funds which load their portfolios with mid- and small-cap stocks. This fund, however, prefers to play it safe and has maintained an average large-cap allocation of 62 per cent. This move has paid off well for the fund as in the ongoing market turmoil (08/01/2008 to 17/03/2008) it was down by 29.45 per cent while the category lost 33 per cent and the index 32 per cent.

The fund has emerged as a star in the equity tax planning category. Its corpus has more than doubled and holds the fourth position among the open-ended funds of its category, as per the April 2008 portfolios.

Sandeep Kothari, the fund manager, keeps the portfolio diverse with stocks ranging between 66 to 91 and rarely any stock accounting for four per cent of the fund’s portfolio. Nearly three fourth of the fund’s portfolio has been held for over one year. The fund manager has picked small positions ahead of most other in a series of small companies which have been very rewarding. These include Ess Dee Aluminum, Onmobile Global, Educomp and Jagran Prakashan.

The fund manager seems to be bullish on the financial services sector and has been consistently increasing the stake in this sector. According to the April portfolio, the allocation in this sector stands at 22 per cent. Technology and Energy are the other dominant sectors in the fund’s portfolio.

The fund has evolved to be a steady well-diversified offering that has consistently beaten the category average.