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Chopping & Changing

A new member in the category, this fund deserves a closer look

Chola MIP has consistently given an above-average return and has been continually improving its past performances since its launch in July 2003. We've just started rating this fund and it has achieved a four star rating. However, this is a very small fund-just Rs 11.88 crore-which has had a shockingly high churn in its management. In 20 months, it has seen five fund managers. The current manager has been around for about nine months now.

As far as the equity investments is concerned the fund has wavered quite frequently within the maximum cap of 20 per cent. Presently, the investment of 19.54 per cent in equity is at all-time high. The fund has shown a very high inclination towards the large cap stocks throughout its lifetime.

Despite the tiny size of its equity holdings, it has been able to diversify well among the high proportion of large cap stocks that it holds. Reliance Industries, ACC, Hindalco Industries and ICICI Bank are names that feature quite regularly in the fund's portfolios and occupy a good chunk of its investments.

Though the fund has managed its debt portfolio with caution, but sometimes it has turned a bit aggressive e.g. in the Q1 of 2004 when its average maturity on its debt instruments exceeded 5 years.

The higher risk paid off the investors quite well as the fund gave above average returns in the same period. Barring this phase the fund has not taken very long calls on the interest rates and as on March 31, 2005, the average maturity of debt instruments was 1.2 years. The high cash component and gilt exposure in the overall picture talks about the risk averse nature of the fund's investment. Around a third of the fund's debt portfolio comprises of high quality AAA-rated investments.

The short history is an inconclusive time frame to bet on this fund with a heavy investment, more so when there are other funds in this category which have given superior returns in both bull and bear phases.

The fund scores high on a below average risk profile, but being a small fund with instability at the top we cannot predict with certainty that these above average returns would continue once the corpus expands.