Though not a stellar performer, it has impressed. In the first year of its launch (2005) it underperformed in all the three quarters it completed. Since then, it has managed to beat the annual category average every year with its best performance in 2006 when it got ranked second in its category with a return of 60.32 per cent (category average: 54.20%).
In 2008, the fund hit a rough patch despite making the right moves. Like every other fund, the cash and debt component rose and its large-cap tilt was all the more prominent, averaging at 68 per cent of the equity exposure. From June 2008, this fund also took a substantial exposure to derivatives. No doubt, every fund faced turbulent market conditions last year, but Tata Infrastructure underperformed the category average in the last two quarters of 2008. “The fund got hit because mid cap stocks fell significantly.
Also, there was a large scale pull out from the Industrial and Capital Goods sectors where investors made good returns over the past two to three years and the economic data was not very positive,” explains fund manager M Venugopal.
But there are numerous occasions when the fund manager hit home runs with his sector bets. The rally in Construction and Basic Engineering in 2006 where the fund held an average exposure of 52 per cent, for instance. In the first quarter of 2007, when the BSE Metal index was down 6 per cent, the fund manager picked up metal stocks and kept increasing exposure to them till it touched 16.29 per cent (December 2007), higher than the category average of 13 per cent. The BSE Metal index returned 121 per cent that year. In 2008, he dropped exposure to Financial Services between January (15.06%) and May (8.56%) as the sector was badly hit that time. But then changed his stance and it touched 23.29 per cent by December 2008. The BSE Bankex delivered nearly 10 per cent in the July-September quarter and was amongst the least hit indices in the October-December quarter.
This fund has a very broad definition of infrastructure to encompass the regular infrastructure sectors as well as Housing, Banking and Financial Services, and Healthcare and related industries. But Venugopal feels that it comes with the territory. “Within the Infrastructure theme there are a number of sub-sectors. So naturally this fund would be a well-diversified, multi-sector thematic fund that is largely growth oriented in nature,” he says. “It's meant for investors who believe in the growth opportunity available to companies on the back of infrastructure creation being a powerful theme in India.” Though the fund's large-cap exposure was more predominant end-2008 and early-2009, the fund manager does not feel it right to say that the fund generally sports a large-cap bias. “Many of these sub sectors have stocks which fall in the lower market cap range.
But when you go down the market-cap range, many stocks don't offer much liquidity and you run a higher risk if the portfolio has large exposures to such stocks. We feel it prudent to have a good mix of large- and mid-cap stocks to balance out the risk-reward equation,” he explains. That would also explain his logic of holding a portfolio where the number of stocks has never gone below 44 but on numerous occasions has crossed 60. And single stock allocation has been circuited at 7 per cent.
Right now the fund manager is betting on Financials, which at 24 per cent is way above the category average (12.53%) and Energy. His exposure to Engineering (12.77%) is also above the category average (10.43%). “The fund has done well in the recent past with recovery in the Industrials and Capital Goods space,” says Venugopal. “Going forward one is likely to see a lot more stock-specific activity.”