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The fund's performance has not been flamboyant, but the charm of the fund lies in the 17 per cent discount at which it is available right now

Morgan Stanley Growth Fund was launched in January 1994 as a closed-end diversified equity fund, which will be due for redemption in 2009. This has been the only fund that the fund house launched. For a long time after it was launched, this fund was an unmitigated disaster, with the NAV unable to move above par in a meaningful way for more than five years. The MSGF IPO in late 1993 was launched with unprecedented hype and its failure to live up to the enormous expectations was instrumental in its parent never being able to launch another fund. While the story of Morgan Stanley's sorrows is one of the great morality tales of the Indian stockmarkets, the fund has managed to do reasonably well since then.

At the time of its launch, Morgan Stanley Growth Fund had capped its targeted amount at Rs 300 crore. The fund was to allot units on the 'first come first serve' basis. The fund house received applications for an amount significantly higher than its stated cap. As a result, an enthusiastic investor challenged this limit in a Delhi court and finally the fund house had to allot units to all investors. And when the IPO ended, the fund was sitting on a corpus of over Rs 910 crore!

Over the years, the fund has emerged as a decent large-cap fund offering. Year 1999 stands out in the fund's performance history, when equity funds were blazing with returns of 125 per cent, but this fund was several notches ahead with 141.13 per cent. However, the fund has lagged an average diversified equity fund since 2002, as mid-caps have raced ahead during this period, while the fund has stuck to its large-cap portfolio. This has been particularly evident in the returns of 2003, the golden year for mid-cap stocks, when an average diversified equity fund was up 109 per cent, while Morgan Stanley delivered 86 per cent. But 2005 was a little different as the large-caps were back in action and the fund ended marginally ahead of an average peer.

On the portfolio side, the exposure to large-caps has seldom gone below 80 per cent. But in the early days of the fund, the portfolio was very erratic. For example, as per the March 1995 portfolio, the fund held an unbelievable 338 stocks. Over the years, that has improved significantly and nowadays the fund holds a portfolio of around 50 stocks. Throughout its life, the fund has been a fan of BHEL. The fund is very bullish upon the stock currently and it is the top holding, accounting for 8.63 per cent of the assets. SBI has been another stock which figured among the favourites of the fund till recently. The fund has this tendency of getting concentrated in top 2-3 holdings, while there will also be some stocks in the portfolio in miniscule proportion (which would typically be some unheard names). At the sectoral front, basic/engineering and financial services currently form the core while construction and FMCGs also account for a significant portion.