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Of Lasting Value

Birla Sun Life '95 rewards investors in the long run...

Over the past 13 years, this fund has had its bursts of brilliance and bouts of underperformance. But it has evolved into a middle-of-the-road performer that rewards its investors who hang in for the long term. Its 5-year return of 23.83 per cent (June 30, 2009) bears testimony to that.

The fund aims at keeping the equity allocation in the 50-75 per cent range and over the past year it has averaged at 66 per cent. While it has never gone below 55 per cent, there are a few instances where it crossed its upper limit of 75 per cent. The latest being in the current rally when it raised its equity allocation from 56 per cent (January 2009) to 75.44 per cent (May). This move contributed to the fund's gain of 58.49 per cent in the rally dated March 9, 2009 to June 30, 2009 (category average: 48.9%).

This aggressive equity allocation with a focus on growth stocks (half the allocation is to mid and small-cap stocks) gives it a risky slant. But the fund manager plays it safe by ensuring that the portfolio is not concentrated on just a few stocks. Over the past year it has averaged at 36 stocks and over the past 18 months no single stock allocation has ever crossed 6 per cent, barring Rallis India. In the earlier years, the portfolio was much more concentrated both, in terms of number of stocks and allocation to the top few.

The fund tends to adopt contrarian stance in its sector bets. In 2006, it was overweight on Financials and Services while its peers were betting on Engineering and Technology. In the first six months of 2007, the fund averaged an exposure of 14.59 per cent to Financials (category average: 7.38%). By December, its exposure to Services was 16.23 per cent (category average: 5.82%) and the fund had no exposure to Metals. In the case of Energy, it had an exposure of just 5.32 per cent (category average: 10.72%). According to CIO, Balasubramaniam, “the equity portfolio is well diversified and also sports concept stocks like Trent Ltd (retail concept) and Everonn Systems (education concept)”.

On the debt side, the fund has a preference for G-Secs and bonds. It mostly maintains a high quality portfolio but does stretch the maturity. “The average maturity is on the higher side because of exposure to G-Secs. If we only look at our corporate bonds exposure, the average maturity will be around 5 years,” says Balasubramaniam. The actively managed debt portfolio goes for duration calls, hence the fund manager tends to stay away from Commercial Paper (CP) and Certificates of Deposit (CD).