Value your funds

Assets managed by Value Funds have grown by an unprecedented 50 per cent to Rs 30,000 crore currently from Rs 20,000 crore a year ago. The sudden surge in growth of assets under management of mutual funds along with the upward movement of the market combined with a run-up in value stocks in the last couple of months has also resulted in growth in AUM of value funds. While Aditya Birla Sunlife Value Fund has grown by 52.20 per cent, L&T India Value Fund has grown by 36. 26 per cent, India Bulls Value Discovery Funds- Regular Plan has grown by 32.39 per cent in the last one year. Both the benchmark indices grew comparatively lower in the same time period-- while Sensex grew by 28.81 per cent, Nifty 50 grew by 28.47 per cent. These funds have surpassed benchmark very impressively in the long term. During three and five year periods, Aditya Birla Sunlife Value Fund has grown by 21.73 and 30.13 respectively, ICICI Prudential Value Discovery Fund has grown by 10.45 and 20.38 respectively and L&T value fund has grown by 19.43 per cent and 26.04 per cent respectively. The three value fund ETFs have grown by over 30 per cent during the past one year outdoing benchmark indices totally. In the past one year ICICI Prudential NV20 iWIN ETF has grown by 33.85 per cent, Kotak NV 20 ETF has grown by 34.73 per cent, Reliance ETF NV20 has grown by 34.53 per cent. Valuation of value funds For investors, understanding the portfolio of a fund is probably more important than merely looking at historical returns. Since value investing style gives more weight to valuations, let us look at the valuations of value fund portfolios. For every fund profile, Value Research gives details about the portfolio. The two valuation metrics given by us are Price to Earnings (P/E) and Price to Book (P/B). We should compare these values with respective numbers for Sensex. As on December 31, 2017, PE of the Sensex was 25.14 while PB was 3.06. During the same time, PE and PB of Aditya Birla Sun Life Pure Value Fund was 19.45 and 2.32 respectively. The PE and PB ratios of Indiabulls Value Discovery Fund was 18.09 and 2.86 respectively. More about the funds Value styled ETFs, like other passive investment vehicles, track the index. The ICICI Prudential NV20 iWIN ETF, Kotak NV 20 ETF and the Reliance ETF NV20 track the Nifty50 Value 20 Index, which has 20 stocks who according to the index manufacturer are 'value companies' forming a part of NIFTY 50 Index. Naturally, the ETFs in sync with the underlying index have huge exposure (10 to 15 per cent each) to Reliance Industries, ICICI Bank and Infosys Ltd. Then, comes Tata Consultancy Services, State Bank of India, Axis Bank, Hindustan Unilever where these ETFs hold 5 to 7 per cent each. The value index also has modest allocation to Bharti Airtel, Yes Bank and NTPC. Let us now look at how actively managed