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K 30 Unit Scheme

With a well-defined charter and new set of rule contributing to its diversity across all times, the fund is well poised to deliver steady returns from a focussed yet diversified equity portfolio

K 30 Unit Scheme seeks capital appreciation, through a select equity portfolio of not more than 30 stocks. The fund can have a 10 per cent allocation to debt.

The manager scouts for companies, with good management record and strategic approach to brand building with financial strength. With its launch coinciding with the selective market turnaround -- the fund was overweight on the three key sectors -- telecommunication, pharmaceutical and consumer stocks, with a lenient check. Exposure to individual stock was limited to 15 per cent and maximum allocation of 40 per cent to technology stocks. Despite the preferred allocation to growth sectors, the fund maintained a reasonable position in cyclical stocks as well. This added to its portfolio diversity. Following this strategy, the fund gained a handsome 152% in calendar 1999, against 64% by the BSE Sensex. However, these return still pales in comparison to the returns from its aggressive peers, the diversification worked as a good hedge in the sustained tech slide last year. In the ensuing market crash, the fund lost 26% of its gains - in line with the category average.

The limited spread in 30-stocks only by its charter has worked favourably for the fund by insulating the portfolio from sundry - low quality and less illiquid stock positions. Despite this, the sizable technology exposure in boom times and the tech wreck has contributed to the fund's ordinary past - 13.71 per cent annualised return since its launch.

Taking its lesson from the tech wreck and a tech heavy portfolio, the fund has framed new rules to guide its strategy. The fund will retain its portfolio spread to its selection of 30 stocks only. But to maintain its portfolio diversity in all times, it will benchmark and realign its sector allocation to that of BSE Sensex, with a 10 percent limit on relative sector divergence. Based on this, the fund with its 19% allocation to FMCG stocks it currently bit underweight to this sector, which with a 13% allocation to technology is marginally overweight on technology, vis-à-vis the current sector allocation of the BSE Sensex.

Given its well-defined charter and new set of rule contributing to its diversity across all times, the fund is well poised to deliver steady returns from a focussed yet diversified equity portfolio.