Birla Mutual Fund is one of the oldest private mutual funds around. By the end of this year the AMC will have completed a decade of existance. During this period, the fund has seen the establishment of a debt market and the evolution of the equity markets into their current form. The fund has also been a participant in this evolutionary process—being among the first to launch a medium-term bond fund, short-term debt fund and a cash fund. The AMC's efforts have been well rewarded and it has grown to become the fourth largest mutual fund in the country managing Rs 9348.61 crore of assets.
The current rally in equity markets has benefited all fund houses and Birla AMC is no exception. The AMC had launched Birla Midcap and Birla Dividend Yield Plus before the current bull run got underway. Both these schemes have been rapidly declaring dividends as the funds NAVs have grown. This has attracted substantial inflows into these schemes.
Birla Midcap, the older of the two schemes, has not done as well as other mid-cap funds. An average exposure of 15 per cent each to IT and FMCG slowed the fund down in 2003. Birla Dividend Yield Plus has not been around for long and the lack of comparable schemes makes it difficult to judge its performance.
Birla Advantage, the AMC's diversified equity scheme, has also used this rally to climb into the second quartile of its peer group. This is after having spent the last three years in the third (2001) and fourth quartile (2002 and 2000) of its category. With this the scheme has also managed to out-perform its benchmark after three consecutive years of under-performance.
Birla Equity, which did a better job of withstanding the technology meltdown, has had the best outing amongst the funds' equity schemes. The scheme has ended 2003 as the top performing tax saving scheme. This was achieved by investing a significant portion of the portfolio in mid-cap stocks. Within this a 20 per cent allocation to financial services kept the fund in good stead.
2003 also witnessed the conversion of Birla IT into a more diversified equity scheme. Renamed as Birla India Opportunities, the scheme now focusses on companies which can benefit from India's outsourcing potential. Though technology is still the top sector with 44.7 per cent of assets, the fund is also invested in healthcare (22 per cent) and basic engineering (6.71 per cent) among others. The fund was the first technology fund to take such a step and has been followed by a number of others in this matter. It remains to be seen if Birla India Opportunities can replicate the strong showing of Birla IT, which had topped the performance charts both in 2001 and 2002.
Birla MNC has also been performing well, and has the best long-term returns profile when compared to other equity funds that focus on multinationals.
Last year, the AMC restructured its fund management process. The emphasis now is on a systems-driven approach with greater accountability and responsibility for individual fund managers. Evidently, this is a reaction to the time when former CIO and star fund manager Bharat Shah ran the entire fund management activity. Shah's reign saw some great successes but also saw huge tech concentrations which eventually proved very damaging to investors. Also, Birla Sun Life has put in place a system of target price (both entry and exit prices) to ensure that the fund books profits and rotates between sectors. Birla Sun Life's belief in a bottom-up stock picking remains at the core of its investment philosophy. But in the case of Birla Advantage, the AMC has placed limitations on the fund's sectoral exposure to 30 per cent of the portfolio.
Among Birla Sun Life's bond offerings, Birla Income Plus has gone through the longest market cycle, of both rising and falling interest rates. With a 5-year annualised return of 12.55 per cent, it is a strong contender for a fixed income portfolio. Birla MIP is another star in the bouquet, which exhibits disciplined equity behaviour and is the third largest open-end MIP in the country. The fund family's gilt offering, Birla Gilt Plus Regular Fund, can easily qualify as one of the best picks in its category, thanks to its active portfolio churning and timely moves.
Birla Sun Life AMC has launched a number of customer friendly initiatives in recent years. To make fund investing and tracking easy, Birla Sun Life has introduced master folio service. This helps investors consolidate their separate account statements into a single account. The Readi Cheque facility for its debt schemes eliminates the need to fill up a redemption request. These fixed denomination cheques issued in the name of investors can be encashed any time.
The Road Ahead
With a decade of experience and a well-stocked product basket, Birla Sun Life Mutual Fund has come a long way in creating a structure which could be tough to replicate. With the markets at a historic high, investors' interest is also focussed on equities. The last bull market gave this AMC a sterling reputation, but most of the gains were frittered away in the subsequent bear market. By doing things differently this time around, Birla AMC could make itself a preferred destination for all sorts of investors.