VR Logo

DSP Merrill Lynch Equity Fund

The fund has been around for a while, but it is clearly putting down its roots now. The fund is evolving to emerge an all weather equity fund.

DSP Merrill Lynch Equity fund, launched in April 1997 has given a total return of 11.77 per cent. In its brief history, the fund has seen two manager changes. Initially, the fund frequently moved in and out of cash. Shifting from this questionable strategy, by late 1998 the fund was largely diversified and actively rotating in and out of sectors. By late 1999 in the unprecedented technology boom, the fund was heavily concentrated in technology stocks. Frequent change of managers has failed to define the fund character. But the new manager at helm from May 2001 has a clearly defined strategy now. The fund will only invest in large-cap stocks and will be well diversified in all times. The fund will benchmark its portfolio and performance against Nifty. It will not deviate, i.e. be under or overweight by more than 15 percent on its sector allocation against Nifty. For individual stocks, the fund has set a deviation limit of 10 percent against respective weight in Nifty. To avoid any illiquid position, the fund applies a filtering criterion based on average traded volume in the past 90-days. It also restricts its portfolio positions in about 30 stocks, thereby striking a balance of diversification with a manageable focussed portfolio.

Today, the fund has been able to achieve diversification with a portfolio spread over 29 stocks without any significant concentration. Technology stocks account for 20 per cent of overall net aseets from a peak of 49 per cent in March 2000. And technology position is narrowly focussed on 6 stocks, dominantly in Infosys. The fund is currently paring its tech position in Satyam with Digital. The fund remains saddled with its illiquid unlisted position in SIP Technologies, accounting for almost 5 percent of the portfolio. The fund's notable success in recent past has been its position in Tata Power. The fund is currently building healthcare position, mainly in Dr Reddy's and Ranbaxy.

DSPML Equity has an average performance track record. The fund's clearly defined strategy and the affirmation of its commitment to this strategy in all times, is a sound long-term strategy. With his strategy the fund manager aims at a favourable risk-reward equation with a 10 per cent downside and perhaps 20 per cent upside.