While the focus has now shifted largely to mid-caps, huge asset size remains a concern
01-Nov-2006 •Value Research
Relying on Growth
Since its launch in October 1995, this fund is known for great returns. In the past five calendar years, it has consistently beaten the category average by a fairly impressive margin. Consequently, its assets swelled to cross Rs 2,000 crore.
This is a disadvantage since the ability to take quick and aggressive positions in small stocks gets diluted with increasing size.
The fund manager has an unconventional approach to investing. While in some stocks he has a quick entry and exit strategy, in others, it is a 'buy-and-hold' strategy. In some cases, it is an 'in-and-out' one. Reliance Industries, the single largest holding at 5.14 per cent, is a case in point: August 2001-April 2002, October 2002-June 2003, December 2003-March 2004, January 2006-till date.
The fund is known for making smart sector moves. After 9/11, the fund kept a higher exposure in PSU and technology. It lost less in the subsequent bear phase of mid-2002 due to a low FMCG 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 metal stocks has added to its performance. Metals and metal products is the most heavily invested sector, though it has not exceeded 11 per cent of total portfolio. Before that, it was basic engineering which at one time (October 2005) accounted for almost 20 per cent of the portfolio.
This year, the volatility in the months of June and July were tough to negotiate and the fund fell more than the category average. However, it beat the average in August and September. While allocation to small-caps has always been large, the focus has now shifted largely to mid-caps.