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Promising Protection

DSP BlackRock T.I.G.E.R. has not disappointed during bull runs

This fund's charm lies in its ability to protect the downside, which it did most recently in the first quarter of 2009, when the category average was -5.32 per cent and the fund managed to stay in positive territory with a return of 0.49 per cent.

But this fund is not just a bear market bellwether. It has not disappointed during bull runs and by and large, its annual returns have been more or less in tune with the category average.

That is exactly what fund manager Anup Maheshwari has set out to deliver. He wants his investors to make money, but does not want them to lose sleep over the twists and turns of the stock market. He offers a compromise: A great fund that cuts the risk, but will not deliver a show stopping performance. And over the long haul, this consistency in returns pays off. Its 3-year annualised return of 14.74 per cent (as on May 31, 2009) puts it ahead of the category average of 11.03 per cent.

In 2008, it managed the downside in the similar way that its peers did - by maintaining a large-cap exposure and reducing equity exposure. But it also increased its allocation to derivatives from 1.76 per cent (January 2008) to 17.96 per cent (November 2008). Its fall that year (-58.19%) was a little below the category average (-60%).

From December 2008, it began to go heavy on Nifty Futures till March 2009. Since then, it has been increasing its equity exposure in the light of the market rally to touch 89 per cent (May 31, 2009). But in the meantime it missed out by delivering 74.41 per cent as against the category average of 81.74 per cent (March 9 - May 31, 2009).

While critics accuse this fund of being all over the place, there's a perspective to consider. The fund was designed with the focus of picking stocks that benefit from growth related to economic reforms and continuing liberalisation. That explains the acronym that stands for The Infrastructure Growth and Economic Reforms. From that point of view, there's no sector (barring, say, FMCG or Infotech) that needs to be excluded. For instance, Media could well fall under its purview if the government decided on changing the norms related to foreign direct investment into the sector.

But the timing of the launch backfired. Set up in 2004 just before the elections, the entire market seemed convinced that the BJP would win and A.B. Vajpayee's government would continue with the liberalization process. The Congress coming to power in alliance with the Left threw everything into question and resulted in a dramatic market crash. As a result, the fund turned into an infrastructure one by default.

Currently, the fund manager is bullish on power and banking, which he believes is a proxy play on the infrastructure sector. So it's not surprising to see the largest exposure to Energy and Financials. There has also been a gradual rise in Construction, but, typical to the fund's style, the fund manager is playing it safe by distributing the allocation over a number of stocks. There have been only two instances when single stock allocation has crossed 8 per cent, both in the case of SBI. Its allocation to top five holdings as well as top three sectors has remained below the category average for most part. Maheshwari admits to pulling Capital Goods and Engineering stocks off the table due to stretched valuations and moving tactically towards Telecom.

Looking at the mandate, diversified portfolio (between 60 and 70 stocks) and consistent returns, it's clear that this one is for the cautious. Neither does the fund aggressively move in and out of sectors or stocks. Its mere size (Rs 2,915.41 crore), prompts it towards large-caps. Those who want to play it safe will be right at home here.