This is an all weather fund and is the best performing tax planning fund with an annualised return of 25 per cent over the five year period ended October 30, 2010. The fund has not only impressed during the market rallies but stood apart with its excellent downside protection capabilities. A lot of the performance is reflected from September 2008, five months after the new fund management team headed by Anand Shah joined.
Once Shah joined, the strategy adopted by the fund changed. “We analysed and evaluated the existing portfolio and made some tactical changes. We focused on the domestic consumption theme as we saw the potential of rising incomes amongst Indians and their ability to spend more. We bet on financials, utilities, pharmaceuticals,” explains Shah. And, the allocation to capital goods, energy and metals was brought down, cushioning the correction in the equity markets.
The fund manages Rs220 crores in its portfolio that gives it the necessary agility to make quick shifts and grab opportunities. For instance, though, the fund cut down its exposure to metals in September 2008, it did not hesitate to increase the allocation subsequently to finally book profits in December 2008. Likewise it increased exposure in banking to gain 15 per cent in the same month. This way, when the category had a 23 per cent fall, this fund limited losses to 11 per cent in the quarter ending December 2008. Again, in March 2009, when the markets were entering the bull run, Shah was able to quickly deploy cash to be 97 per cent invested by May 2009 resulting in the fund outperforming the category by eight per cent.
The fund manager frequently invests and sells few stocks in the portfolio, using a target price exit strategy. For instance, Reliance Industries, Axis Bank and Zee Entertainment Enterprises are stocks in which the fund manager has deployed this strategy which has been profitable. However, Shah argues these instances to be exceptions as he normally invests with a long-term investment horizon. The fund is well diversified with 52 stocks in its portfolio that makes it stable.