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Disappointing Track Record

Religare AGILE is a large-cap driven fund, but its performance makes it avoidable…

AGILE is an acronym for alpha generated from industry leaders. This fund from Religare has a universe of stocks whose individual market capitalisation is higher than the smallest stock of the Nifty. Another parameter employed, for a stock to be included in the universe, is that the floating stock of the company should be larger than the stock with the least float in the Nifty. Further, the model only selects stocks which have a price history of at least 12 months before the date of investment. Going by these entry points, it’s obvious that this is a large-cap oriented quant fund. The model throws up 11 stocks on the basis of quantitative analysis by computer-based models and 9 per cent of the corpus is invested in each. The balance 1 per cent is allocated to cash and money market instruments.

The point to be made here is that these stocks will not be traded during the month. The weights (9% per stock) may undergo a change depending on the performance of individual stocks in the course of the month, but this will be due to price movements and not at the fund manager’s discretion. The model generates an output on the last working day of the month after the market closes.

If there is significant price movement in the stock, an actively managed fund will see the fund manager trying to gain from market movements. That is not possible here. So while it promises a portfolio of the best of the large-cap breed, its returns can fall way short of expectations.

Returns
The performance is disappointing, to say the least. If one takes a look at the annual performance over the past three years, it is extremely difficult to make a case for investing in this fund. When compared to the category average and the Nifty, it had fallen harder in the market downturn of 2008 and failed to adequately reward investors during the subsequent market upturn of 2009 and 2010. If one looks at the quarterly returns, the volatility is stark and it makes for a very turbulent ride
In its worst ever 1-year patch, it lost a stomach churning (-) 60.30 per cent (January 8, 2008 - January 7, 2009). A look at the current long-term performance (January 31, 2011) echoes the same theme. Its 3-year return of -7.15 per cent is way below its own category average as well as the category average of Mid & Small Cap funds.
Having said that, if one looks at very recent performance, there is some respite. The 1-year and year-to-date returns put it marginally ahead of the category average and the Nifty.

Our View
The fund’s portfolio is completely large-cap driven. This should be an attraction to investors who are not willing to dabble in smaller fare. However, the portfolio is extremely concentrated with just 11 names and the returns have been abysmal. There is no other way to state it: this fund has failed to deliver. Avoid this fund.