VR Logo

A Bear Market Fund

Unit Scheme '95 isn't the fire-in-the-belly sorts, but it has a proven track record of protecting the downside. A moderate growth strategy makes it a fine choice for a conservative investor.

This hybrid fund's track record of moving between stocks and bonds at the right time leaves a lasting impression. Although the fund hasn't turned in a stupendous performance during roaring markets, its resilience in bearish times has managed to draw crowds. Having witnessed a full market cycle, Unit Scheme '95 has a credible record, delivering a 5-year annualised return of 20per cent as on May 2, 2003.

A strong penchant for investing in globally competitive and wealth-creating companies, the fund, at any point in time, doesn't have too many momentum stocks in its portfolio. Lack of past disclosures restricts us from commenting on the quality of debt holdings, but since the year 2002, Unit Scheme '95 has worked hard to improve its credit quality.

From a debt-heavy portfolio in its salad days, Unit Scheme '95 has gradually become more of an equity-tilted fund. Since corporate bonds accounted for 80 per cent of its assets initially, interest income contributed to the fund's return until 1998. With the stock market turnaround in 1999 and the fall in interest rates, equities became the mainstay, accounting for over 50 per cent of the portfolio. Therefore, that year Unit Scheme '95 posted a ballistic 65 per cent return. However, the category's gain of 94 per cent overshadowed the fund's good performance. The reason for this was the latter's limited technology exposure—in top-tier companies—and a marginal stake in mid-cap stocks.

This conservative approach worked well when stock markets headed southwards in 2000. While most of its peers bled, the fund held its ground by moving quickly into bonds. This helped Unit Scheme '95 survive equity market downfall in 2001. While it protected the downside, the fund gained the least during the post-9/11 rally.

Aggressive sorts may not find this fund very appetising. Even in 2002, though the fund invested in market favourites such as auto, energy and financial services stocks, the participation was limited. Also, during bullish times in the past year, its government securities exposure rarely went beyond 10 per cent.

Thus, a moderate growth strategy would well place Unit Scheme '95 in the conservative investor's investment basket.