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Impressive Numbers

An actively managed equity portfolio has enabled Reliance Regular Saving Balanced to consistently be a top quartile performer…

With a low equity exposure, its start wasn’t impressive. But it has emerged as a strong contender in this space. Its first annual performance was a top quartile one and in the next four years, it has consistently found itself amongst the five best performers.

Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. It is only this year that the equity exposure has averaged around 70 per cent. There are just about five instances in the 60 months prior to 2011 where the equity allocation has crossed 70 per cent. In fact, during the crash of 2008, the fund managers had no problem lowering the equity exposure to just 54 per cent (May 2008). That naturally helped in curtailing its fall. The equity portfolio is very actively managed. It is not rare to see the fund enter a stock only to completely exit it within the next few months. Even stocks that have appeared for a long period of time in the portfolio have witnessed such movements. The only stock which has been held for maximum period at a single stretch of two years is State Bank of India.

So it is only natural to see such movements in sector allocations too. For instance, in 2009, allocation to Oil & Gas moved between 5 per cent (June), 15 per cent (September) and 5 per cent (November). Similarly, in Technology, it moved from 4 per cent in (October 2009) to 11.36 per cent (January 2010) to drop to 5 per cent (April 2010). The fund blends its portfolio between large and mid caps. Towards the end of 2010, the fund manager took a bet by averaging his small cap allocation to around 21 per cent. This risky bent is now apparent. While currently half of the equity assets are in large caps, a year ago (June 2010), it stood at around 73 per cent.

On the flip side, the portfolio has gotten much more diversified. The fund no longer holds just 15 to 20 stocks, but prefers sticking with a little more than 30. To add to it, the aggressive bets have also been tamed down. Allocation to a single stock has never exceeded 5 per cent since 2010; prior to that it had gone up to 7 per cent on several occasions. The increased diversification is probably the result on the growing asset size, which has seen a massive growth in the past two years.

On the debt side, the fund invested in cash and cash equivalents till February 2010 and since then has started taking exposure to different debt instruments.
Though this year the fund is struggling, going by its long-term track record, there is every indication that it will bounce back.