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Matchless

Over the years, staying on top has become this fund's habit. And it has done this while largely sticking to its 60:40 equity debt allocation at almost all the times

This senior citizen of the balanced funds' family has earned a distinct respect for itself. Its long-term performance is impeccable. Since launch, the fund has reserved a place in the top quartile every year. Interestingly, it has done this while largely sticking to its 60:40 equity debt allocation at almost all the times. Even in 2003, when the equity markets were zooming, it did not breach this limit and still managed to top the category with a whopping 91.92 per cent return. This means that while the fund does not take the risky route of betting high on equity, it manages top returns through smart stock selection.

Star fund manager Prashant Jain's sector moves and spread of equity portfolio over 20 to 30 stocks has worked extremely well for the fund. For example, Jain successfully rode the post-9/11 tech rally by increasing exposure to the sector from 5.6 per cent in November 2001 to 15.8 per cent in December 2003. Similarly, when energy stocks were shooting up in 2002, he increased exposure to the sector from 4.3 per cent in January 2002 to 16.7 per cent by March. He banked heavily on banking stocks and increased exposure from 5.4 per cent in November 2002 to 17.34 per cent in July 2003. Since then, he has maintained a decent exposure to the financial sector, which has been proved extremely fruitful for the fund-between July 31, 2003, and November 30, 2004, the BSE Bankex has gained 56 per cent.

The fund's strategy to stick with quality stocks has also paid off well. For example, State Bank of India has been in the top five holdings of the fund since August 2002.

However, the dangerous lure of mid- and small-cap stocks has started to attract the fund manager-as on November 30, 2004, mid- and small-caps together accounted for as much as 75.18 per cent of the fund's equity holdings. Since May 2004, the fund has committed over 50 per cent of its equity assets to mid- and small-caps. Though this strategy is a matter of concern, a look at Jain's track record and the fund's performance should give you a comfortable sleep.

On the debt side, the fund's portfolio is conservatively managed with few credit risks. AAA papers are favourite, along with a few risks on the margin (AA and above). Overall, you can't have a better hybrid fund.