At a paled down annualised return of 18.91%, Birla Advantage well bears the scars of market volatility in 2000. While the short term is mired in red, the long-term return looks impressive.
Launched at a time when the cyclical rally in 1995 had fizzled out, the fund went through a prolonged spell of inertia, just managing to guard its assets. Pursuing a bottom up approach, the fund invested in the golden triangle of Information Technology, Pharma and FMCG sectors since 1998. With the fund manager's knack for picking up potentially strong performers, coupled with the market recovery since late 1998, yielded splendid return in 1999.
However, spurred by its exceptionally strong performance, the fund failed to limit sectoral exposure in early 2000 that stretched beyond prudent diversification. The continued concentration in the high priced technology stocks (average 65%) saw the fund succumb to the tech carnage. With its strategy toppled, the fund lost a whopping 46% in calendar 2000 and made it to the bottom quartile.
While the fund has largely scaled down its technology exposure in the current calendar, it has now diversified to pitch in favour of pharma, FMCG and economy stocks. "The emphasis on diversification has increased further now but the change in outlook for technology is not permanent," says Jeremy Beswick, CEO and President, Birla Sunlife AMC.
Even while thye fund has not been able to reveal a new discovery, its knack for picking "the right stocks at the right time" saw the fund go overboard on technology. Given its past track record and stance on technology, the fund is likely to pursue an aggressive investment strategy, which calls for a long-term commitment.