Historically, it has taken relatively lower interest rate bets on its debt holdings but has been aggressive with its equity portfolio to generate extra returns.
Its long-term performance scorecard makes for good reading. Its returns since launch (Jan '01 to September '04) as well as three-year returns are the third-best in the category. However, the recent volatility in debt markets has made a dent in its performance scorecard. It stands 16th out of 26 funds in the year-to-date returns and has under-performed even the category average. The half-yearly and quarterly figures also hum a similar tune - in both cases it figures in the bottom half of the category. However, the fund's active management style and its past track record suggest that it would be able to turn the tide.
Birla MIP manages its portfolio actively — both on the debt as well as on the equity fronts. For instance, in 2002 when interest rates were being continuously slashed, the fund with a relatively high average maturity (2.89 years on an average) and approximately 80 per cent of its corpus in debt securities managed to top the category with returns of 15.4 per cent. Again, between April-August '04, the average maturity of the fund's debt holdings, has varied in the range 2.16-1.36 years. This has enabled the fund to protect its downside. Finally, the fund has off late increased its exposure to below AAA or equivalent rated securities in order to earn higher coupon. However, the situation is far from alarming, as in the last 12 months, on an average only 12.26 per cent of the corpus has been invested in such securities.
Its equity portfolio is well-diversified — spread over 30-40 stocks and across more than 11 sectors. Moreover, exposure to any single stock is rarely more than 1 per cent. In the last one-year, it has primarily had a large-cap orientation, with on an average 64.5 per cent of its equity holdings in large-caps. However, during the equity bull-run (April '03 to Jan '04), the fund had maintained an average of 37.5 per cent of its equity portfolio in mid-cap stocks. This suggests that the fund is willing to take a higher risk exposure, occasionally, to boost its returns.
A look at the fund's historic month-end returns tells us that this fund has never delivered negative returns for two consecutive months. Moreover, it has never underperformed the category for more than two consecutive months. All this suggests that it is only a matter of keeping your faith in the fund's performance and the results will follow.
This article was originally published on September 30, 2004.
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