Safety First | Value Research Birla Sun Life MIP II Savings 5 won't match the returns of its peers, but it will help protect the downside…
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Safety First

Birla Sun Life MIP II Savings 5 won't match the returns of its peers, but it will help protect the downside…

A fine choice for those looking for a low-cost debt fund with just a dash of equity. With the maximum equity exposure capped at 10 per cent, the risk is instantly lowered. Not to mention the fund manager’s decision at times to actually drop it to zero. In this light, one cannot expect this fund to match the returns of its peers which have heavier equity bents going right up to 25 per cent. Hence, if one looks at this fund on an annual basis, there will be many years of category underperformance. For instance, this fund underperformed the average by quite a margin in 2007. During the heady days of the bull run, the equity exposure was actually nil, a feature that continued for 20 consecutive months running right through 2008. Simultaneously, the fund manager took aggressive bets on the debt side. End 2008, its average maturity crossed 10 years for two months. The fund was a category topper with a performance of 28 per cent in 2008 (category average: -3.65%).

Since 2009, the equity allocation has averaged 6.61 per cent. One would think that with such a low equity allocation, the number of stocks would also be minimal. Not so. Over the past three years, it has averaged at 33 and touched a high of 52. Mohanty believes that “the number of stocks in the portfolio should not be dictated by the percentage allocation to equity”. He maintains his focus on building a well-diversified equity portfolio to contain volatility in the overall portfolio. Hence, the tilt towards mid and small caps is not risky given the low equity allocation and broad basket of stocks. Low equity allocation coupled with aggressive maturity bets touching 17 years (December 2007) have evidently worked. An investor would have comfortably withdrawn at the rate of 8 per cent over the past five years without seeing a dip in the initial investment at any time.




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