After beating its peers almost every year (barring 1999 and 2002) in its history of close to 14 years, the fund found itself in the fourth quartile in 2007. It was the only year when it underperformed the S&P CNX 500.
But the very next year, it was back to a top quartile performance. It not only curtailed its fall to a lower level in 2008 but also delivered close to 100 per cent in 2009.
The fund has generated superior returns and shown resilience while protecting the downside time and again. Its 10-year annualised return is 28 per cent (February 28, 2010).
The fund’s mandate is not limited across market caps or sectors.
Although currently over half of the fund’s assets are into large caps, it has not always been the case. In 2004, almost half of the fund’s assets were into small caps. In 2006, when large caps outperformed, the fund increased exposure to large caps to 60 per cent of the portfolio and did it again in 2008.
It is among the very few funds which have invested in the Indian Depository Receipts (IDR) of Standard Chartered PLC (UK) and is amongst the few not holding Reliance Industries in its portfolio. Even in its sector allocation the fund is not wary of contrarian moves. In 2000, when most funds were heavy on IT stocks, this one held onto FMCG stocks and was quick to offload its Tech exposure. It delivered 5.74 per cent that year (category average: -24.13%). In 2009 when Energy was chased (category average exposure: 16%), this fund had just 10 per cent allocated. Its contrarian moves can backfire. Being relatively underweight to Energy and Metals in 2007 led to the dismal performance that year.
The rising asset base has led to an increase in the number of stocks to 55, from around 40 stocks (end 2007). However, the fund has a long tail of stocks (currently 23) each with an allocation of less than 1 per cent. They collectively account for close to 10 per cent of the fund’s portfolio. With the top 5 holdings accounting for 22 per cent, the fund looks well diversified. Allocation to a single stock has rarely exceeded 7 per cent after Kulkarni took over in November 2006.
At times the fund is seen taking aggressive sector bets. For instance, Auto (26%) and Engineering (25%) in 2005. Contra sector bets could also backfire.