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Precarious Delivery

Birla Sun Life MIP follows different investment strategies at varying points in time. In the end, it delivers the goods but with a risk trade-off

Erstwhile Alliance MIP, it was known for its aggressive debt portfolio. But after being taken over by Birla Sun Life Mutual Fund, it changed colours under the new management.

However, it now seems to be reverting to its old aggressive ways. For instance, the average maturity rarely dropped below two years till late 2005. After that it was substantially lowered. Since November 2006, the average maturity has been more than three years and was 4.05 years in December.

The fund often held below AAA-rated paper in double digits, one of the highest in the category. The exposure was cut down to a single digit. But it's on the up again and such papers account for over 18 per cent of the portfolio. In the past seven months, the allocation to cash (and money market instruments) has varied from 1.03 to 13.71 per cent. During the same period, the allocation to G-Secs has ranged from nil to 39.23 per cent.

Over the past seven months, the equity component has varied between 13.5 per cent and 16.73 per cent while the allocation to mid- and small-caps has been on the rise. In July last year, 57.65 per cent of the portfolio was concentrated in mid- and small-cap stocks. It rose to 67.43 per cent in September 2006 and in January 2007 it stood at 74.43 per cent. Though its (1-year, 2-year, 3-year and 5-year) returns are above the category average, it is a volatile performer. It shone in 2002 and 2003 to be ranked among the top two funds, but managed to deliver category average and below category returns in the following two years. But in 2006, it was back in reckoning with a top quartile performance. Its expense ratio is not low at 2.16 per cent.