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Birla Sun Life MIP

The new team has toned down aggression. High expense ratio & large exposure to mid-caps are areas of concern

Birla Sun Life MIP has changed colours under the new management. The fund has toned down some aggression and now looks more like a conventional monthly income plan.

Earlier Alliance MIP, the fund was known for its aggressive management approach to both equity as well as debt portfolio. That no longer is the case. While the fund managers continue to manage the equity part aggressively, caution seems to be their priority for the debt portfolio.

The fund loved to play the maturity card aggressively. The average maturity used to be very high it rarely dropped below two years till late 2005. The fund managers had similar strategy for the credit quality of the portfolio. They did not hesitate to buy below AAA-rated papers. Till December last year, it used to be in double-digits, often close to 20 per cent — one of the highest in the category and way above the average category exposure. This aggressive stance had rewarded the fund handsomely but it had also cost it dearly at times. For example, too much allocation to equities in the portfolio backfired in 2001 when the fund found itself at the category’s bottom. Also, a higher gilt exposure at higher maturities caught the fund off guard when the bank rate was unexpectedly hiked in July 2000.

Things have completely changed now. Exposure to lower-rated papers has been cut substantially to single digit. Over 70 per cent of the portfolio is now parked in high-quality corporate bonds and commercial papers. Portfolio maturity too has been substantially lowered.

These ‘corrections’ under the new management have helped the fund control volatility. Standard deviation (a measure of risk), which always used to be more than an average peer, has dropped sharply to 0.40 as against a category average of 0.48. Still, with more than half of the equity portfolio committed to mid-cap stocks, this fund can test your patience. Another concern is high expense ratio. At 2.16 per cent, it is way above average peer’s 1.79 per cent.