Launched in October 2005, it had a bad start with a return of just 8 per cent in 2006 (category average: 28%). But ever since 2007, it has consistently beaten the category average. In both the bull runs of 2007 and 2009, it managed to do so by a margin of at least 7 per cent. In the bear hug of 2008, it lost just 50 per cent (category average: -60%). A commendable feat when one realises that that the fund didn't resort to aggressive cash calls. In fact, the fund's cash allocation never exceeded 10 per cent in 2008.
CIO Ramanathan K puts down 2009's performance to savvy stock selection. “Our performance attribution revealed that 90 per cent of our success last year was due to key stock selection.” Micro Inks, NIIT Technologies, Bharati Shipyard, Oriental Bank of Commerce and Crompton Greaves were some of the picks that played out well.
Though a mid- and small-cap fund, this one differs from its peers in its objective, which is to invest at least 65 per cent of its assets in high dividend paying companies. If one compares this fund with other dividend yield offerings, then last year it was impressive with a return of 105 per cent. None of the other dividend yield funds came close to it. Of course, a prime reason was the tilt towards smaller market cap stocks.
Across portfolios, this fund house is overweight on the domestic consumption theme. In this fund, the tilt currently is towards Consumer Discretionary, reflected mainly in Auto (especially in the 2-wheeler space) and Services. “By nature, this fund will be underweight on Metals and Infotech, where dividend yield stocks are not easy to find,” says Ramanathan.
Being a tiny fund with assets amounting to less than Rs 50 crore, the fund manager is in a position to deftly move in and out of stocks and sectors and even take substantial bets in them. Instead, the fund tilts towards a buy-and-hold strategy. Being a small fund, it maintains a fairly compact portfolio of around 34 stocks where allocation to a single stock has not exceeded 5 per cent (average over the past year).
Its annualised return of 22 per cent over the 3-year period ended April 30, 2010 is almost double the average return of the category (10%).