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Bold Posture

With nearly a fifth of portfolio parked in equities, and the fund's fascination for lower rated papers, it is meant for aggressive MIP investors

FT India MIP will test your patience. But those willing to stay invested for the long-term should have no problem here.

Experienced management team and good long-term track record are the positives. As on June 6, 2006 it boasted of the best three- and five-year returns in the category. Having said that, the fund has been hit hard during the recent crash. Between May 10 and June 6, when the Sensex fell more than 2,650 points, the fund lost 4.71 per cent. The fund also registered its worst ever monthly return of negative 4.40 per cent between May 5 and June 6. With a sizeable exposure to equities, this is bound to happen and that's why we believe FT India MIP is not for ultra-conservative investors who panic at the first stroke of a loss.

Historically, active management of equity as well as debt portfolios have resulted into handsome gains for investors. FT India MIP started as a Rs 43-crore fund in November 2000 and established itself as the best in its category the very next year. Since then it has delivered consistent returns. Investors started to flock to the fund from mid-2003. It achieved a maximum size of Rs 1,984 crore in May 2004. The fund has seen the assets drop since then - by May end, FT India MIP had Rs 676 crore under management.

The reason for success is adroit management of both the equity and debt portfolios. On the debt side, the fund has benefited immensely by playing its maturity card aggressively - it normally keeps average maturity more than an average peer (although it has brought it down considerably in the last couple of months from 2.6 years to under an year now)

It also loves to invest in lower rated papers to squeeze some extra returns - for instance, below AAA papers have enjoyed double-digit representation consistently. On the equity side, the fund makes optimum use of its mandate to invest up to 20 per cent of the assets in equities. Prior to the market decline of May 2006, the fund cashed in on the equity markets rally by allocating an average 19 per cent of its corpus to equities. Within equities, the fund tries to rely upon large-cap quality stocks.

This fund can be a good choice for aggressive investors willing to wait.