If one looks at the investment strategy, which points towards a large-cap bias with around 60 stocks in the portfolio, there's definitely a cautious stance. Though Kothari does not have the shackles of sector, market cap or investment style to deal with, he adheres to a large-cap tilt. “The investment process does not start with market cap bias; however, while looking at various investment options I keep the liquidity risk in mind. While I do not bucket investments in mid cap or large caps, if I get a 30 per cent return without taking a liquidity risk and a mid cap offers a 40 per cent return, I would opt for the larger cap company. However, if the long-term prospects of the mid-cap company are very good and I can see a much larger upside, I would invest in it.”
The biasness of the fund manager also extends to sector allocation -Financial Services has dominated since its launch with an average allocation of around 22 per cent. “This sector is a good proxy to the overall growth in the economy. India still has a low penetration of financial services and the potential to grow and compound returns over the long-term are quite good,” says Kothari.
Whatever be his strategy, he has not compromised on returns. Category beating returns are the norm, apart from 2007 when he refused to chase momentum stocks and the fund put up an average show. In 2009, it delivered an 86 per cent return and was the second best performing fund in its category in 2010. The fund manager has also been good at protecting investors' money during periods of market turmoil. This year (till August 30), the fund lost 13.59 per cent (category average: -15.71%). It was also better off than most of its peers and the benchmark in 2008. Kothari increased the cash allocation but it never exceeded 13 per cent in any single month and averaged around 11 per cent between July 2008 and March 2009.
Though he sticks to large caps, he does not take huge bets, the largest individual stock bet being Reliance Industries, the only one where stock allocation has exceeded 6 per cent. Kothari also enters stocks which are relatively less popular among other funds. He entered Gujarat Fluorochemicals and Motherson Sumi Systems when very few funds showed interest in them. He bought Whirlpool of India in September 2007, when only one other fund was holding it. The stock is still in the fund's portfolio and has delivered around 700 per cent since then. He is also invested in the National Stock Exchange of India, an unlisted company. Category beating performances and stable returns have made this one a strong contender.