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Stable, but Impressive

No market cap bias & a non-aggressive equity exposure keeps Birla Sun Life 95 grounded…

In its early years it was a heady fund with remarkable returns. Over time, it has tamed down and left those brash ways but delivered. It has outperformed the category average 13 years (out of 16) of its existence. Over the past 15 years, it has delivered an annualized return of 26 per cent. A feat that majority of pure equity funds have failed to achieve.

This fund takes a go-anywhere approach where market cap is concerned. In 2009 and 2010, the portfolio gravitated towards mid and small caps with an average allocation of around 55 per cent. As large caps began to gain favour, by November 2011 the portfolio had a drop in its exposure to smaller fare and up to 76 per cent exposure to large caps. Currently, close to 70 per cent of the equity portfolio is allocated to large caps. Added to the flexibility in lowering equity allocation is what gives this fund better downside protection. Last year, it averaged around 64 per cent (category average: 71%).

When the current fund manager took over in June 2009, he began to gradually diversify the portfolio by way of number of stocks. From less than 40, it climbed to 66 recently. Consequently, the allocation to the top five has come down to 17 per cent (past 1-year average).

The debt portfolio is also actively managed and there have been signs of aggression. Bonds and debentures have always been preferred and the portfolio tends to be concentrated on a few holdings. “The fixed income portion of the portfolio is managed actively and we take active duration and spread calls. The corporate bond portfolio is typically invested in high quality companies with strong balance sheet and high credit ratings,” says Mahesh Patil, Co-CIO. Higher maturity calls are evident. The average maturity of the debt portfolio went up to 10.35 years in December 2008, a bet that paid off handsomely. “With moderation in core inflation and growth slowdown, we think that it was appropriate for RBI to start focusing on growth rather than inflation alone. We believe that this is the start of the rate easing cycle and fairly bullish on adding duration. Keeping in mind the large government borrowing schedule, we would like to play out the theme through corporate bonds rather than G-Secs,” says Patil. n