The only other publicly traded equity fund after Mastershare, Morgan Stanley Growth Fund is among the largest closed-end equity funds today. Launched in 1994, the fund raised close to Rs 1,000 crore during the IPO boom, backed by huge investor expectations.
Its total return of 4.31% since launch is indeed disheartening. But then its relative performance – a 7.33% return over the past five years — bests almost two-third of its open-end rivals. And from its all-time low of Rs 6.74 in December 1996, the fund is up a whopping 110% today. Since 1997, it consistently bought back its units, which traded at a discount of about 40-47% then. This also helped shore up its NAV. But the real trick was a complete overhaul of a bulky portfolio in 1998. Until then the portfolio looked more like collection of 340 stocks. The IPO boom of 1994 largely contributed to the same. It got rid of junk stocks in 1998. Post-revamp, the focus was on three key sectors – technology, healthcare and consumer stocks. And, today, it just holds 45 scrips across key sectors like technology, FMCG and financial services — its main thrust areas. And its loyalty to some of its early picks like Container Corporation and HDFC Bank has worked out well for the fund.
The change of tack helped the fund outperform the Sensex in 1998 and 1999. Subsequent market turmoil notwithstanding, its trailing 1-year performance is in line with that of an average open-end diversified fund. And with the gap between its NAV and market value coming down in recent times, the units being bought back by the fund has come down.
In its current form, Morgan Stanley Growth, with a well-diversified portfolio is a good long-term holding for patient investors, who can stay put for the next seven years, when the fund is due for redemption. The steep discount of 28% to its current NAV of Rs 11.72 adds to its charm. The only growth fund available at a bargain value.
This article was originally published on August 23, 2002.
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