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Growth Specialist

Through an unconventional approach to portfolio management and multiple investing style, this fund has made huge money for its investors

This mid-cap specialist is unique in several ways. Through an unconventional approach to portfolio management and multiple investing style, this fund has made huge money for its investors-as on February 6, 2006, Reliance Growth has the best 10-year trailing return of 34.39 per cent per annum. Last year, it earned 68.73 per cent to retain its top quartile position for the fourth straight year.

In August last year, it adopted yet another unconventional strategy by shutting its door to fresh investments. Since the fund primarily invests in relatively illiquid mid- and small-cap stocks, large inflows could prove to be a hindrance and hence the decision was a welcome step. However, the lure to manage more money and earn more fees seems to have persuaded the management to ignore this aspect now. On November 14, 2005, the fund opened its door once again and since then, investors have rushed to buy units. As on March 31, 2006, the fund managed Rs 2,639 crore as the largest mid-cap fund. Huge inflows is indeed a concern now as the fund manager might encounter problems while purchasing additional thinly-traded mid- or small-cap stocks without driving up the share price and making them more expensive.

Reliance Growth loves cash and uses it effectively to capitalise on new opportunities. The fund manager also has an uncanny knack of picking winners among untested stocks. In some stocks, it is a buy-and-hold investor and in some others, it gets in and out quickly to benefit from the momentum.

Historically, the fund manager has shown more interest in small-cap stocks. However, with the markets touching new milestones by the day, it has curbed its temptation for them--in the last one year, allocation to them has consistently dropped from 34.53 per cent in December 2004 to 11.93 per cent as on December 31, 2005.

The fund is known for making smart sector moves. After 9/11, the fund took a lead by keeping a higher exposure in the then hot sectors of PSU and technology. Then, it lost less in the subsequent bear phase of mid-2002 due to a low FMCG allocation. Following the rally in bank and auto stocks in 2003, Reliance Growth increased exposure in both sectors. Recently, the fund's higher allocation to engineering and metal stocks has added to its performance.