This fund takes risks but does not leave investors unrewarded. Over the 5-year period ended June 30, 2010, it has delivered an annualised return of 13.35 per cent (category average: 9%).
The fund's aggression arises from its high exposure to equity. It was this stance that led it to be the best performer in its category with a return of 31 per cent in 2009 (category average: 15%). When the equity market took a dramatic turn in March, the fund held 25 per cent of its assets in equity, while the category had an average allocation of just 12.14 per cent. Naturally this put the fund in an enviable position and it delivered 18 per cent in the June 2009 quarter (category average: 8.15%). But make no mistake; it is well within its investment mandate which permits an aggressive equity allocation of up to 25 per cent. Since 2005, the allocation has never dipped below 20 per cent.
However, in 2008 its investors were tested. That year when the equity market was in turmoil, the fund manager boldly decided to stick to his high equity allocation which averaged 25 per cent. The fund shed 8.24 per cent against the category's -3.42 per cent. That was also the year when the average maturity of its debt portfolio was high, which was surprising since historically the fund's average maturity has largely remained in line with its category. The brazen moves resulted in 2008 being the only year when the fund underperformed the category average.
While the equity exposure with a mid-cap bent gives it an aggressive tilt, the fund manager has turned very cautious and currently holds an extremely diversified portfolio of 73 stocks. One wonders at such a bloated portfolio - the result of insignificant allocations to a large number of stocks.
The aggressive stance is balanced with a diversified equity portfolio and quality investment on the debt side. The fund won't go heavy on G-Secs, but prefers debentures and Certificates of Deposit (CDs) and even takes exposure to structured obligations (SOs).
The rising asset base has resulted in the expense ratio falling from 1.82 per cent (March 2009) to 1.58 per cent (March 2010). Moreover, the fund has been consistent in dividend distribution. Of the total 78 months, it has distributed dividend in 71 months. Since April 2009, the fund has declared 0.60 per cent as dividend every month. All this makes it a compelling pick in its category.