With at least one decent fund across all categories, DSP Merrill Lynch is ready for a bigger role in the Indian mutual fund industry. The fund house has grown at a decent pace in the past couple of years. And unlike others, who have swelled their AUMs through a flurry of new fund launches, DSP Merrill Lynch MF has preferred to stay on the sidelines.
“Every scheme that we have launched, including those in the equity asset class, has a distinct investment objective and positioning,” S Naganath, President and Chief Investment Officer of DSP Merrill Lynch Fund Managers, told Value Research.
“We are in favour of new funds, provided they add distinct value to the range of products available to the investor and also uniquely contribute to the portfolio of schemes offered by the mutual fund house,” he said.
Well, this is a tough principle to follow, especially when you see your peers mopping up huge sums. However, DSP Merrill Lynch has not changed its stance. The last equity fund, DSPML T.I.G.E.R., was launched way back in May 2004. Still, the fund house has managed to improve its rank as well as market share, thanks to fresh inflows in the existing schemes.
At April end, the fund house managed Rs 13,201 crore worth of assets, up 111.77 per cent from a year back.
By launching its SSIP last year, the fund house displayed its ability to think out of the box and come up with innovative ideas. SSIP combined investment with term insurance in a cost effective manner. Investors had the option to chose from the four equity and one balanced funds of the fund house. This was a good attempt to integrate investments with a pure risk cover. At the same time, it promoted its existing products.
“The Super SIP offer was open only for a limited period and the response was very encouraging. We are considering introducing it again in the future,” Mr Naganath told Value Research.
Product & Performance
On the equity side, the fund house has five distinctly-positioned funds. The core fund, DSPML Equity, which the fund house believes has the lowest risk among the equity funds, hunts for value stocks. So far, the fund has done reasonably well. In fact, the last three years have been very good for the fund, which has led to an improvement in its rating.
DSPML Top 100 fund concentrates on large-cap stocks. The fund has gone through some tough times to move up the category return chart since its launch in February 2003, as the time has not been too favourable for large-cap stocks since then.
DSP's most popular and largest equity fund, DSPML Opportunities, takes aggressive calls to maximize returns. Through an actively-managed portfolio, the fund has done well and is one of the best opportunities funds around.
The AMC's youngest fund, DSMPL TIGER (The Infrastructure Growth and Economic Reforms Fund) has gained in stature in a very short time. In the year ended May 17, 2006, the fund is among the top 10 in the category of diversified equity funds with returns in excess of 104.52 per cent. DSMPL TIGER offers an actively managed portfolio with focus on companies and sectors that are expected to benefit from structural changes and investments in infrastructure from the public and private sectors. The fund house ranks the fund as the riskiest of all its diversified equity funds.
The AMC's only sector fund, DSPML Technology.com, is one of the best in its category. It offers a well-diversified portfolio - balanced with large-, mid- and small-cap stocks - low volatility and consistent returns. It's a fund that appears much more prepared to handle the turbulent technology sector.
Though the equity side looks good enough, it contributes only 22.29 per cent to the total asset under management. The fund house also lacks a tax-planning fund and a pure mid-cap fund.
Among hybrid funds, DSPML Savings Plus Moderate Plan looked struggling last year after an extraordinary 2004. The fund can invest up to 20 per cent of net assets in equities and hence is expected to do well in favourable equity markets.
DSPML Balanced is a good enough fund, protecting the downside well. A large-cap bias, relatively low expense ratio and below average standard deviation make this fund one of the better balanced funds. On the debt side, DSPML Liquidity has had a good run. All medium-term bond funds are in trouble and DSPML Bond is no exception. DSPML Floating Rate Fund has been a performer since the start.
The Way Ahead
DSMPL Mutual Fund looks well-placed to cruise ahead. With a good equity portfolio and decent hybrid as well as debt products, the fund house has something for every class of investors.