The fund's performance during the 2008 crash has bolstered our confidence in it. Despite an average start, it began to put its act together in 2006. In 2007, fund manager Inamdar brought an edge to it.
The changes he made to the portfolio were interesting. Allocation to FMCG rose while exposure to software was hacked. Also, ample shuffling was done in financial services and healthcare.
But the more difficult task was turning this fund into a disciplined offering. The lack of strategy was clearly evident in its initial years. Attempts at market timing was seen in individual stocks, where the fund manager would exit stocks altogether only to get back, often very quickly. The number of stocks, on the other hand, could dip to as low as 21 or shoot up to 50.
But a trait now apparent in the fund is consistency of returns and stability. The portfolio averages at around 28 stocks with the top 10 holdings accounting for nearly half the portfolio. The large-cap bias, coupled with a reasonable cash allocation, has helped the fund hold its own in the downturn in 2008.
But where the fund got a miss is in the recent rally (09/03/2009 to 30/06/2009). The fund manager remained conservative during the rally as it allocated around 16.62 per cent to FMCG sector between March and June. This capped the fund's gain to 51.73 per cent compared to 71 per cent rise in an average equity diversified fund over this period. Also, it is only in May that the fund manager lowered the cash allocation to 3.86 per cent while in the previous two months the average allocation was 18.46 per cent.
With a large-cap bias, the fund may not impress during the market upside but with good downside protection capabilities it will benefit the long-term investors.