Reliance Vision is living in the memories of a once-glorious past. This 12-year old fund's history of trying to deliver benchmark-beating returns can be divided into three distinct phases-five mediocre years, then two fabulous ones and now, five more years when it has barely managed to cope. Since the beginning of 2004, it has outperformed the benchmark at an annualised rate of just 1.1 per cent.
How did a fund that perform so wonderfully in 2002 and 2003 suddenly lose its mojo? A careful look at the data shows that this was a very different fund in those days. In 2002, the fund outran the BSE 100 by 68 per cent and its category by 57 per cent. In 2003, the outperformance grew to 70 and 48 per cent respectively. During that time, this was a small (Average--Rs 112 crore) fund that dabbled in small and mid-caps a lot. During those years, large caps were a minority in the portfolio at an average of 26 per cent, on occasion falling to the vicinity of 10 per cent. This adventurous approach worked wonderfully.
However, as the market took off from 2003 onwards the fund's great track record attracted huge investments and its size ballooned. From Rs 67 crore in January 2003, it grew to Rs 624 crore by the end of that year. The large size meant that the fund manager's time of living dangerously was gone and with that, its days of beating its benchmark were became a thing of the past.
Still, since investors only really look at absolute profits, they didn't mind the total return of 219 per cent that it generated from 2004 to 2007. However, like most average funds, all those profits have now been wiped out in the crash of 2008.
During 2008, the fund fell more than BSE 100 in the first half of the year. During the second half, a large pile of cash (average-29 per cent) ensured that it fell less than the benchmark. For the year as a whole, the fall was just three per cent less than BSE 100.
Unless Reliance Vision turns a new leaf in the future, there's no particular reason for investors to be attracted to it.
This article was originally published on January 21, 2009.
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