After a gloomy start in early 2000, Birla Sun Life New Millennium has covered a long distance improving its performance year on year. The fund has been performing quite decently since 2003 with an average annual return of 47.718 per cent compared to average category return of 43.39 per cent. In 2006, it clocked a return exceeding 46 per cent.
The fund, which was launched as a large-cap fund, underwent a change in orientation in mid-2002 for mid-cap stocks, again to favour large-caps from mid-2004 onwards.
Though the fund has been paring its mid-cap holdings, small-cap exposure has increased over the past two years.
An erstwhile Alliance fund, it was taken over by Birla Sun Life Mutual Fund in September 2005. The transition to the new fund house was not smooth though, as it grossly under-performed in the very first quarter after being taken over. But the initial apprehensions seem to be a thing of the past now, and the fund is now performing reasonably well under the new management.
An analysis of the portfolio suggests that diversification is one thing that the new management is taking quite seriously. The fund's portfolio currently has 31 stocks, a substantial increase from its earlier norm of holding only 10-15 stocks.
With the increase in the number of stocks, the concentration in the top holdings has also come down. To illustrate, the top five holdings accounted for a whopping 81.5 per cent of the portfolio in February 2004. But as per the February 2007 portfolio, their share has been brought down to under 43 per cent. This is a welcome step, as a concentrated sector fund has the potential to deliver some nasty blows to the investors. This relatively conservative stance also gets reflected in the fund's lower volatility. Its standard deviation of 5.83 per cent is currently second lowest in the category.