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Birla Sun Life Frontline Equity has managed to outperform its category in both good & bad times

Now here’s a fund for all seasons. Birla Sun Life Frontline Equity has consistently outperformed its benchmark BSE 200 year after year since its launch in August 2002. And even in the longer run, the fund has given returns in line with its category. In the past five years, the fund has turned in 33 per cent annually, which is almost equal to its category’s returns. And in the past three years, the fund has significantly outperformed its category, delivering 26 per cent returns as against the category’s 19 per cent.

But probably the best part about Birla Sun Life Frontline Equity is that it has managed to beat its category even during the bad times. Since the fund’s launch, its category has given negative returns in seven quarters but the fund has been in the red in only six of these seven quarters. Even in the recent turmoil, in the first quarter of 2008, the fund gave negative returns of 24 per cent, four per cent less than the category’s fall of 28 per cent. And in the second quarter too the fund managed to restrict its fall to the average fall of the category.

The fund has managed to stay afloat thanks to a large-cap tilt. The fund has a concentrated sector allocation while has diversified it over a large number of stocks. The new manager, Mahesh Patil, after he took up the reins in November 2005, has increased the number of stocks by over a double to 56 in December 2007 from 26 in October 2005. Currently, the portfolio is made up of 48 stocks.

Sector-wise, at present the fund manager is bullish on technology and financial services. After the tech downfall in 2007, the manager reduced exposure to this sector from around 13 per cent in July 2007 to four per cent in March 2008. He increased the same to nine per cent in June 2008 and added HCL Technologies, which it had exited in October 2007. The fund has also taken a bold contrarian call on banking stocks despite that they were the worst hit in the first six months of 2008. The fund has added stocks like Axis Bank, ING Vysya Bank and Union Bank of India to its portfolio. The exposure to the energy sector has also been increased significantly from around eight per cent in August 2007 to 16 per cent in January 2008. The same is currently at 18 per cent.

A well diversified portfolio with a tilt towards large-cap stocks and average returns over the long run makes the fund a good pick among the equity diversified space.