This fund has put to rest the notion that dividend yield funds shine only in market downturns. If you have a problem believing that, take a look at the numbers.
During the recent bull run (June 15, 2006 - January 8, 2008), it posted an absolute return of 73 per cent putting it ahead of its peers and even above the average equity diversified return. In the fall that immediately followed (January 8 - October 27, 2008), its decline was the least amongst its peers. In the last two calendar years too, its performance has been impressive when compared to its peers.
Fund manager Swati Kulkarni has no qualms about rapidly moving in and out of sectors and boldly rides her bets. Whether it was to aggressively raise the energy allocation over 2007 or increase the metal allocation over the last few months of the year, it all paid off. This year, financial services moved down from almost 17 per cent to 8 per cent but has started inching upwards once again.
It's not just sector bets. Some of her mid-cap stocks too held her in good stead. She bought NIIT Technologies in May 2006, ahead of her peers (with the exception of ING Dividend Yield), and the move paid off. Even her timing with Balrampur Chini Mills, Greaves Cotton and Cummins India proved lucrative. The return in 2006 saw this fund streets ahead of its peers with picks like Marico, NIIT Technologies, State Bank of India and Axis Bank reaping rich rewards.
Once the market crashed, she brazenly increased the cash allocation, drastically cut it short in September 2008 with a simultaneous move into debt. But what can be seen right now is more of a tilt towards conservatism. The equity allocation has reduced to just around 68 per cent, the balance being in debt and cash. The number of stocks in the portfolio has risen to 46 with the large cap allocation standing at more than 50 per cent.
Towards the end of 2007, energy cornered 30 per cent of the portfolio. Energy is still the most preferred sector with an allocation of 18 per cent, but it is the top two sectors (Financial Services & Energy) that now corner 30 per cent of the portfolio.
The fund has proved to be quite nimble and tends to quickly adapt to the environment. Overall, it is a clear winner in its category.
This article was originally published on December 23, 2008.
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