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A Highly Adaptive Fund

Ability to perform in different market conditions makes this fund special. It can be a good option for long-term investors

Like most of its peers, Kotak Balance has also started taking high exposure to equities, especially the rewarding but risky mid- and small-caps. For example, equities accounted for an average 53 per cent of the fund's portfolio in 2001. Now, they take up 64 per cent of the portfolio. On the other hand, exposure to debt has decreased from an average 41 per cent in 2001 to around 22 per cent in 2004. Allocation to mid- and small-cap stocks has also shot up-from an average 27 per cent in 2001 to a whopping 65 per cent of the equity portfolio in 2004.

Though this shift has made the fund a bit more volatile than its average peers, its performance justifies its aggressive posture. With a year-to-date till December 16, 2004, return of 19.71 per cent, it is the fourth best fund of the category. The fund has also outperformed the category average returns across time periods.

Kotak AMC has seen a high turnover of its equity fund managers in the past three years. The fund has not been very rigid with its asset allocation in the past. For example, when the bulls returned to the equity markets in early 2002, the fund reduced its bond exposure from an average 41 per cent in 2001 to around 33 per cent in 2002.

The fund has always maintained a highly diversified equity portfolio. It cashed in on the technology boom of early 2000, but in a limited way. Since April 2001, it has hardly maintained more than 10 per cent exposure to the tech stocks.

The fund has also been conservative with its investment in the auto and energy stocks. The fund follows a 'buy-and-hold strategy' with stocks like Infosys and HPCL having found almost a permanent seat in the fund's equity portfolio.

On the debt side, Kotak Balance does not compromise with quality. In early days of its investing life, the fund had a bias towards corporate bonds, but the soft interest rates in 2001 forced the fund to change its gear towards government securities. At present, treasury bills, cash and bank deposits dominate the bond portfolio.

This fund knows how to change with the times and provide impressive returns to its investors. A good fund for long-term investors.