VR Logo

A profitable bet

This fund's stock selection is sector agnostic and not limited by market cap levels

If you are looking for a fund which truly adheres to a buy-and-hold strategy, this one fits the bill. With such a small corpus, it would not be surprising to see the fund manager dabble in smaller stocks, churn his portfolio rapidly or take concentrated bets. Contrary to expectation, that is not the case at all. The fund started off as a large-cap offering, changed its complexion and now once again is predominantly in large caps. It is also one of the funds with the least amount of churn. Till date, just 54 stocks have appeared in the fund's portfolio and out of them only eight have been held for five or months or less. What you will find here is a value based, well diversified, liquid portfolio.

“We are completely sector agnostic and neither is our criteria on the market cap of the stock,” explains Kumar. “We are value investors who go for bottom up stock picking and closely look at the daily average trading volume of the stock. From our universe of companies, we make our pick.”

The fund house follows a very process driven strategy. Buy and sell limits are set for each of the stocks. Only stocks that fall within the predetermined purchase price are picked up. Once a sell limit is reached, the team re-evaluates the target and if they do not find value in holding on at that price, they exit the stock. This would explain why the fund often has substantial cash allocations during market run ups. It would also explain why in 2008, the cash and debt exposure in any single month never exceeded 5 per cent of the portfolio.

The fund's style means that it can lag behind its peers when speculative growth stocks rule the roost. In 2007, the fund lagged behind the category average with a return of just 46 per cent. Its high cash and debt exposure (16%) in the December quarter that year also contributed to that. Moreover, the fund manager refused to shed his IT exposure despite the fact that tech stocks were reeling under the pressure of rupee appreciation. Come 2008, and this very exposure was its saving grace. “We look at the long term fundamentals of the company before we invest in it. Once done, we do not get swayed by market movements,” says Kumar.

Not only has this fund rewarded its investors over the long term, it is even one of the cheapest ones available in terms of a low expense ratio.