This fund has proven its ability to ride out corrections
15-Feb-2011 •Research Desk
The fund targets the same sectoral weights as BSE 200, subject to flexibility of selecting stocks within a particular sector to generate long-term capital growth, income generation and distribution of dividend. In its eight year history, the fund under performed only once in 2003 compared to its benchmark, but it started out performing its category average only from 2006. This is largely attributed to Mahesh Patil taking over as fund manager in November 2005.
The fund’s performance during market upswings has been mixed. The large-cap focus has limited its ability to benefit from rallies led by mid-cap stocks, such as the one seen towards the second half of 2007. But the fund’s ability to quickly change track in sync with market trends, provides a higher salve. For instance, while most equity funds struggled to mirror market returns in 2009, BSL Frontline despite sporting high cash exposure in the first few months of the year was quick enough to up its equity ante.
In 2009, it delivered 90.45 per cent when the category average was 80.19 per cent. “We got into good quality stocks at distressed valuations. We also bought into certain stocks when the de-leveraging story began to play out and firms were able to raise money as liquidity eased,” says Mahesh Patil, Head Equity—Domestic Assets, Birla Sun Life Mutual Fund. While Patil does adhere to this strategy, there have been deviations. For instance, he was underweight in the Energy and Engineering sectors in 2006 and 2007, which Patil attributes to stretched valuations. And as the assets in the fund swelled, the fund has diversified its portfolio to 60 stocks currently.
A long-term track record of good performance, proven ability to ride out corrections better than most peer funds and benchmark, with a focused exposure to blue-chip equities makes the case for this fund. Over the past five years, the fund has delivered an annualised return of over 23 per cent, placing it among the top funds in the category. That the fund is among the few to have bettered their respective benchmarks each year in the last five years also adds to its appeal.