The risk averse will feel right at home here. “The equity asset allocation is capped at 15 per cent with a large-cap orientation. We look for sectors which look promising on a medium to long-term basis, available at reasonable valuations and ensure exposure to all the major sectors in the benchmark,” says equity fund manager Srivatsa. This fund rarely favors mid caps, has never invested in small caps and currently has over 90 per cent of its equity portfolio in large caps. The number of stocks has ranged between 27 and 37 over the past year.
The conservative tilt is also visible on the debt side where investments in G-Secs have never exceeded 25 per cent of the debt portfolio while exposure to non-convertible debentures (NCDs) has touched a high of 96 per cent. According to debt fund manager Chopra, “The portfolio consists of paper in the one- to three-year maturity range with a rating above AA. The aim is to be in the maturity bucket that offers the best return profile with minimal volatility.” The debt portfolio is churned only when the fund manager changes his outlook on a particular part of the yield curve or credit. Else, the debt portfolio is constructed with an 18-month period outlook.
Though the average maturity has never crossed the four-year market in its entire history, is currently on the higher side in comparison to its peers. “Currently, looking at the expected decline in rates following rate cuts by the RBI, we wish to gain from the steepness in the yield curve as well as a potential rally in bonds,” explains Chopra.
The conservative stance of the fund has made it a sturdy offering. Even when the category has found itself in the red, this fund managed to curtail its fall to a lower level. In 2008, it limited its loss to 0.37 per cent (category average: -3.65%). The expense ratio has risen over the years but is still in line with the average.