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Keep The Faith

Pioneer ITI Infotech has been underperforming its peers. Year-to-date through July 30, 2002, the fund has lost 21%, but it is not out completely. It still proves to be a fine choice for long-term investors.

Despite a bumpy ride this year this fund is still a compelling option for investors. Pioneer ITI Infotech is among the few tech funds, which have managed to guard their assets in rough markets. However, its year-to-date loss of 21% as against the peers' loss of 10% through July 30, 2002, has been a nightmare for investors, who have seen this fund clock stunning returns in 1999. No doubt post-9/11 last year, it topped its 12-member category owing its success mainly to the strong rebound of large-cap holdings. However, this year, the biggies haven't done much to write home about.

In comparison, the fund's rivals who lapped up mid-cap stocks managed better returns than it did. That apart, its top five large-cap holdings account for 73% of the total portfolio, which has acted as a spoilsport. But then one should know that the fund's fetish for quality saved it from a severe thrashing during the tech meltdown of 2000. With a limited participation in the momentum stocks it managed to restrict its losses to 40%, as against the peers' loss of almost 50%. Moreover, by virtue of a well-timed launch it registered a blistering 477% return in 1999.

All through this fund has stuck like glue to large-cap technology stocks. Companies like Infosys, Satyam Computers and HCL Technologies have been a permanent fixture in the portfolio. Of this, Infosys accounts for a 27% exposure, which in recent times has worked against it. But the fund manager justifies this strategy on the grounds of his long-term view and the decision to shy away from less sustainable business models. This explains for absence of beleaguered stocks like HFCL and Global Telesystems and a marginal exposure in second-rung stocks like PSI Data Systems and Tata Infotech. And also commensurate with its belief that it's too risky to think short-term with technology stocks.

In all, Pioneer ITI Infotech's belief in fundamentals has helped it prove its mettle. So what if this placed it at odds against its peers, at least in the short run. For long-term tech investors, this fund is clearly a fine choice.