Great returns but the ride could give jitters
01-Mar-2007 •Value Research
The first thing that hits you about this fund is the great returns. In 2004, it delivered 9.31 per cent (category average: 5.60 per cent). The next year, it delivered a fabulous 16.48 per cent (category average: 9.09 per cent). It was the top-performing fund in both these years. 2006 saw it slip to the fourth slot with a performance of 12.63 per cent (category average: 9.17 per cent).
With a large portion of its corpus in equity, the reason for this performance can be traced to the stock market rally. Though its equity allocation has dipped marginally from July 2006 (25.11 per cent) to January 2007 (23.77 per cent), it is still very high when compared with its peers.
Besides a significant equity allocation, a large portion from it has been assigned to mid- and small-cap stocks. This has risen from 49.62 per cent (July 2006) to 70.58 per cent (December 2006). In January, it was at 64.91 per cent.
High quality corporate debt dominates the portfolio with top-rated commercial paper following closely behind. Since January 2006, its average credit rating has stayed at AAA. While there is some exposure to lower rated debt (below AAA) to boost returns, the exposure peaked at just 7.81 per cent during this period. And except for March and April, G-Secs have been part of its portfolio. The average maturity has not been high and has hovered at 1.27 years.
The fund balances its aggressive equity approach with a conservative debt strategy. The risk associated with equity was very visible during the stock market crash last year. The fund had its worst month during that period and lost 6.67 per cent (May 9 - June 8, 2006). A good fund from returns' perspective but not for too conservative investors.