True to its objective, it’s a focussed and aggressive offering. It anchors itself in the sectors or themes it believes to be most promising and then bets on a few stocks.
Though at times it has held even less than 20 stocks and occasionally crossed 30, it has by and large gone with around 28. So one should not be surprised to find that its entire investment universe comprises of just 49 stocks since inception. But that has not prevented active churning. Around 60 per cent of its stocks have been held for five months or less. Of the remaining 40 per cent, RIL, SBI and L&T have been its most favoured.
The suppleness is even seen in sector allocations. The fund manager doesn’t hesitate in investing aggressively in the top performing sectors and exiting them completely when the sector underperforms. For instance, the metals allocation in 2007 rose from September (19.32%) to December (27.52%) to fall back in January 2008 (16.45%) when the market tanked. In 2007, when computer software stocks were reeling under the pressure of an appreciating rupee, the allocation went to nil in July from 14.5 per cent in June. By November 2007 it re-entered with a small allocation and exited completely by January 2008.
A noticeable trait is the way the fund manager flees to cash when the going gets tough. There have been many instances when the cash allocation has crossed 20 per cent and since 2008 it has been all the more frequent. In fact, the equity allocation dropped from 98 per cent (December 2007) to 77 per cent (March 2009). There have also been occasions in the fund’s history when the cash allocation has exceeded 25 per cent (its upper limit).
Its first three years were not too impressive but from 2006 onwards it began to shine, aided by smart sector bets. Being overweight on FMCG, energy, communication and infotech (for some part) helped it fall less than the category average in 2008. Its large-cap bent and allocation to cash also helped.
Though a very tight portfolio, its large-cap tilt and readiness to flee to cash on defensive considerations helps cushion the fall. And, no longer do the top five stocks corner 40 per cent of the portfolio, around 25 per cent is more like it.
Overall, this actively managed portfolio has certainly delivered what it set out to do.