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It is among the better funds in the category for its quality equity as well as debt portfolio, low volatility and decent performance track record

Equity is the key to this fund's success and since they have taken a beating, DSPML Savings Plus Moderate (like all other equity-heavy MIPs) has suffered. Between May 10 and June 7, the fund lost 4.17 per cent, taking the year-to-date return to a meager 2.26 per cent. The fall should not come as a surprise. With no hope of recovery in the debt markets, the fund had no choice but to bank on equities to overcome its last year's underperformance - allocation to stocks went up from 8.67 per cent in October last year to a high of 17.72 in April. And when the tide turned against in May, the fund took a beating. A large-cap orientation helped the fund reduce some pain. The fund management, though, has taken preventive measures and cut the equity exposure to 12.41 per cent in May.

The fund began with assets of just Rs 23.72 crore in February 2003. The stress was on safety and the AMC positioned the fund's debt portfolio as the one with relatively low average maturity, consisting mostly of short-term and medium-term floating rate assets, which largely reduce price volatility. On the equity side, though the exposure could go up to 20 per cent, the investment universe is restricted to top 100 companies by market cap, thus contributing to a largely liquid, large-cap portfolio, with relatively lower price volatility. The fund has largely stuck to this approach. As a result, its standard deviation (a measure of risk) has always been less than an average peer.

The fund performed exceedingly well in 2004 when it earned a top-quartile return of 7.34 per cent. This made the fund popular, as the assets swelled close to Rs 800 crore in mid-2004. However, the fund could not sustain lead over its aggressive peers who earned handsome returns by investing in hot mid- and small-cap stocks. This year, when the tide turned in favour of large-caps, the fund made up for the lost ground.

It is a decent fund for those who want the power of equities but not risk. The fund looks good for its quality portfolio. The concern here is the rising expense ratio. At a time when nothing substantial is expected from the debt side and equity markets are in a slump, this fund charges more than an average peer. The fund needs to keep this in control. Change of managers in April at a crucial time like this is something that investors need to watch carefully here.