This fund has consistently outperformed its peers in all the five years of its existence.
In 2007, it trounced the competition with a return of 110 per cent (category average: 61%). In 2009, the fund erred on the side of caution as Andrade began to lower equity exposure only in the second half of the year. Yet it managed to beat its category with ease and in 2010 grabbed the fifth position among 62 funds.
The fund manager scouts for smaller businesses with long term potential that are available at cheap valuations. His compact portfolio is laden with mid and small caps ranging between 20 and 36 with the allocation to a single holding going up to 7 per cent. It’s not rare to see single sector allocations go up to 20-25 per cent and even touched 45 per cent (Services in May 2007).
According to Andrade, he “picks trends before the introduction stage and tries to play the entire growth cycle,” referring to strong enduring trends, societal trends and cultural trends. “It’s a portfolio tailored to pick companies riding strong environmental trends. These are little companies on their way to being great companies,” he explains.
This strategy is what probably results in contrarian stands; his bias towards Services ever since inception till mid 2010, his restraint from going heavy on Energy or Metals even if the sectors are gaining impressively, staying away from Pharma despite the sector doing well in 2010 are examples.
Andrade has an interest in keeping the fund size small and preventing short-term money from flowing into the fund. Hence the periodic closure for fresh investments (though SIPs are ongoing). Depending on the valuations the fund manager decides when to open the scheme for subscription and on the collection of “manageable” corpus closes it.
Concentrated sector exposures could hit if the bets don’t play out. Andrade admits it’s a high return-high risk portfolio which focuses on buying emerging business and taking a call on the organization to ride the growth curve of the business cycle. Till date it has rewarded investors during rallies and shown tremendous resilience during downturns. Of the total 10 quarters when its category has been in red, the fund registered a lower fall in nine. In the bear phase from January 8, 2008 - March 9, 2009, it shed 54 per cent (category average: -63%). This year too, its loss is limited.
* Since August 2010, the fund monthly discloses only top 15 holdings