Birla MIP is the quintessential MIP—it represents the best that both debt and equity has to offer. If you were looking for a fund, which combines the stability of debt with the higher returns of equity then your search should end with the Birla MIP.
While the fund's volatility is in line with the category average, its returns are much above the average. Together, these give the fund one of the best risk-adjusted returns in the category. Investors have taken note and there has been a seven-fold increase in its assets in the last one year.
Though Birla MIP plays on a higher equity portfolio (within the stated limit of 15 per cent), it has been able to manage risk by diversification and concentrating on large caps. For instance, the fund's current equity exposure of 14.2 per cent is spread over 42 stocks. Spread across performing sectors such as automobiles, finance and energy, this has boosted returns considerably.
The fund's debt portfolio is spread over corporate bonds, government securities and commercial papers. After starting off with a portfolio of top-rated corporate bonds, Birla MIP had in between ventured into below AAA rated bonds to augment fund's return. However, with declining spread between AAA and below AAA rated bonds, the focus is once again on the quality. AAA bonds, gilts and P1+ commercial papers currently account for nearly 60 per cent of the portfolio.
Birla MIP's fund mangers have actively managed its debt portfolio. For instance, in the second half of 2002 when debt markets were on fire, the fund's high average maturity (in the range of 3-4.5 years) helped it top the category that year. This posture also benefited the fund in the mid-year rally of 2003. However, Birla MIP was unable to avoid a loss in the volatile first quarter of 2003. Reason: the fund reduced its average maturity in February 2003 - just before the reduction in small savings rate and banks savings account rate - thus not benefiting from the rally post-announcements. However, witnessing the current volatility in the debt market, the fund's average maturity has come down to below 3 years now.
Overall, Birla MIP has given investors good returns with low volatility. Birla MIP is suitable fund for all sorts of investors.