Even though this fund is not the best of the lot, it has its basics well in place. Continuity of management, the least volatile portfolio among the three FMCG funds, a strong belief in buy and hold, and reliance on large-cap stocks for major part of its life are some of the strong positives that we see.
Beginning its innings as Kothari Pioneer (KP) FMCG Fund in March 1999, it's slightly different from peers. The fund does not restrict its options to pure FMCG stocks. For example, it's the only FMCG fund that has invested in media stocks like Zee Telefilms, NDTV, TV Today Network etc. The fund manager believes that even television programmes are being 'consumed' by the masses and hence the exposure to media stocks. This may sound like an eclectic viewpoint but the wider approach to stock selection has certainly helped the fund deal with trouble in 2000. Thanks to the exposure to media stocks, it lost only 14.10 per cent as against the 16.31 and 34.34 per cent loss of Prudential ICICI FMCG and Magnum FMCG. A high cash allocation (23.61 per cent in October 2000) also helped.
The continuity of fund manager K N Siva Subramanian (the man behind Prima and Bluechip) since inception is a big advantage. Mr Subramanian has a habit of sticking to his picks for long periods of time. For example, the average holding period of this fund is nearly three years. And this is the average-stocks like Marico, ITC and Asian Paints have never gone out of the portfolio in the fund's six-year life. Among the fund's favourite picks, ITC has almost always commanded a lion's share followed by HLL and Zee Telefilms during the initial years.
As far as performance is concerned, the fund's fortunes have fluctuated just as one expects from sector funds. Interestingly, it has done well in tough periods, but lagged behind peers in booming markets. For example in 2000, when FMCG stocks were out of favour, it managed the downside well. However, in favourable 2003 it failed to match the returns of peers. Greater emphasis on large-cap stocks let the fund down.
The situation is somewhat different now. The fund manager has adjusted his approach and started to invest in mid- and smaller companies liberally. The result has so far been encouraging. The fund has gained nearly 40.67 per cent in the year to date as on October 20, 2005.
This article was originally published on October 21, 2005.
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