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Extreme Performances

Typically, when the market rallies, it's on top of it. When it falls, the fund tumbles

If you have no qualms about a choppy ride, then this nimble offering is worth a look. Originally, the Chola Freedom Technology Fund, it turned into an opportunities fund in December 2003. Over the next two years, its performance was far from impressive. But it was in 2006 that it began to change for the better. Though not quick to shed its tech tag, that year was marked by a significant shift away from that sector.

The fund also substantially increased its exposure to financial services, averaging at around 22 per cent between July and November 2006. During this period, the BSE Bankex impressed with returns of nearly 50 per cent.

It was smart sector bets that worked in its favour in 2007. Exposure to the energy, metals and engineering sectors moved up towards the end of the year and the fund manager was rewarded handsomely for these moves. In the last quarter of 2007, the fund delivered an astounding 43.74 per cent (category average: 28.39%).

But if it truly made its mark in 2007, it faltered miserably in 2008. Its exposure to financials and construction backfired. The BSE Bankex was down by 52.23 per cent and BSE Realty, down by 82.13 per cent. It also tended to tilt more towards mid- and small-cap stocks and only towards the end of the year began to up its large cap exposure.

But this variable performance is exactly the fund's character. When the market rallies, it's on top of it. When it falls, the fund tumbles. The numbers bear witness to this. In its best year (ended December 12, 2007) it delivered 93.82 per cent! In its worst (ended January 13, 2009), it fell by 63.17 per cent. More recently, its best month (ended April 9, 2009) impressed with a return of 37.47 per cent. Its worst (ended October 24, 2008) was a return of -42.98 per cent.

But its volatility in returns does not imply that its portfolio is inherently very risky. For instance, no longer does it boast of a very tight portfolio packed with concentrated sector and stock bets. It's a fairly diversified offering and a nimble one at that. With a very small asset base, this fund finds its strength in its flexibility. Of the total universe of 270 stocks invested in so far, nearly 43 per cent have appeared for less than five months.