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Late Starter

Birla Sun Life MIP II Savings 5 failed to make an impression in its early years, but seems to have woken up

Birla Sun Life MIP II Savings 5 was launched in 2004 and as per its mandate, the fund aims to invest fully in debt and money market instruments (which includes securitized debt also). The fund manager will also be allowed to invest a maximum of 10 per cent of its assets in equity and equity related securities.

So far, the fund has failed to shine out. In the first three years of its existence, it couldn’t even beat its category. However, since April 2007, the fund’s performance has started to improve. Since that time, the fund’s exposure to equity has been nil. Though it missed the bull run, this moved paid off when the markets tanked this year. While the category generated negative returns for the quarters ended March 2008 and June 2008, the fund generated positive returns of 2.33 and 2.22 per cent.

These improved results can be attributed to increased quality of paper held in its portfolio. The fund has been maintaining an average exposure in P1+ rated instrument of around 89 per cent since April 2007. The fund’s average maturity period has always been lower than its category. Since November 2007, the average maturity of the fund was as low as 149 days vis-à-vis its category, which was 981 days. This resulted in a positive return for the fund while the category was in red.

Among the various diversified instruments, the fund is bullish on Commercial Paper and Debenture of public and private sector banks like UCO bank, Allahabad bank, ICICI & IDBI. As of June 2008, Karnataka Bank’s Commercial Paper accounted for 76 per cent of its total asset.

The fund has also done a commendable job in bringing down the expense ratio from 1.87 per cent (March 2005) to 0.40 per cent (June 2008).