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Wealth Creator

The fund known for its outsized returns but large and growing asset base will increasingly be a barrier to its performance

Launched in October 1995, this fund is known for its great returns. If we take a look at the past five calendar years, it has consistently beaten the category average by a fairly impressive margin. While it was ranked 25 (out of 58) in 2001, it maintained a top quartile position during the next four calendar years and was number six (out of 101) in 2005.

This year also, the fund is ahead of an average peer so far. While the volatility during months of June and July had been tough to negotiate, the fund made up for the losses in August.

With over Rs 2,000 crore being managed, this one is the largest mid-cap fund and like Franklin India Prima, that is cause for concern for this fund as well. The ability to take aggressive positions in small stocks, get in and out of them quickly gets diluted with increasing size. It will be interesting to see how the fund manager negotiates these issues in the near future. The fund had shut its doors to fresh investments recently. But in August it again resumed to take in fresh investments.

The fund manager has an unconventional approach to investing. In some stocks, it is a buy-and-hold strategy and in others it is a quick entry and exit strategy. While allocation to small-caps has always been large, in the past year or so it has gradually dropped.

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 sector allocation.

Following the rally in bank and auto stocks in 2003, Reliance Growth increased exposure in both sectors. Earlier this year, the fund's higher allocation to engineering and metal stocks has added to its performance.