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Wealth Protector

Birla MIP looks a bit unexciting right now, but its conservative approach, ability to generate returns during the good as well as the bad times and low volatility should appeal cautious investors.

Of course its recent performance-6.79 per cent return till December 5, 2005, since the start of the year against average peer's 8.53 per cent gain-looks discouraging but investors should keep in mind that Birla MIP is more of a wealth protector and not an aggressive wealth creator. Unlike Birla MIP, most outperformers have a mandate to invest more in equities and have generated returns by cashing in on markets' rally. This has resulted in higher returns but also in high volatility. On the other hand this fund's volatility has dipped this year-in November, the fund's standard deviation of 0.32 was one of the least in the category.

Birla MIP started off as an ultra-conservative fund in November 2000. Though it had the mandate to invest up to 15 per cent of the its corpus in equities, it hardly crossed an average 5 per cent in the first two years, and rightly so as equity markets were in trouble. Then, returns from debt were enough to make it one of the best MIPs. By active duration management and a well-diversified debt portfolio spread over quality corporate bonds, gilts and commercial papers, the fund earned category-beating returns in both 2001 and 2002. A portfolio with an average maturity period of around three years during 2002 helped the fund make the most of the falling interest rates in the economy. As a result the fund returned 15.36 per cent. The fund's portfolio underwent a makeover in 2003. The tide turned in favour of stock markets and the fund increased its equity exposure to 12.51 per cent on an average basis. The strategy clicked and the fund collected 15.97 per cent that year.

Birla MIP hit a rough patch during 2004 as a result of rising interest rates. Though it maintained an average 13.20 per cent exposure to equities, they were not enough to save it from the hit from the debt side. On the equities side, though the fund largely favours large cap stocks, it goes aggressive with its sectoral bets. For example at October end, more than half of the equity portfolio was concentrated in three sectors.

Recently, the fund underwent an interesting manager change. From November, three persons would manage the fund. While Navneet Munhot, who took the responsibility in September 2005, would continue to manage the fund, the equity portfolio would be led by Mahesh Patil and Ankit Sancheti.