According to Arnav Pandya, L&T Contra Fund is one scheme that investors should stay away from because of its inconsistent performance. The nature of the fund increases the risk element, making it an unsuitable investment for those investors looking for a low risk buy and hold strategy.
L&T Contra Fund
Nature: Equity oriented open ended
Inception: February 2006
Assets under Management: Rs 8 crore at the end of December 2011
Fund Manager: Pankaj Gupta
- This fund was part of the portfolio of DBS Cholamandalam Mutual Fund before it came under the banner of L&T Mutual fund. The fund had the highest exposure to the software sector followed by banks and Pharma at the end of December 2009. While this was the situation none of the sectors had an exposure of more than 10 per cent. In terms of the individual stocks the highest exposure was to ICICI Bank followed by Glenmark Pharma and Dishman Pharma. Reliance Industries and ITC completed the top five holdings. The fund had a mixture of large cap and mid cap holdings and it was active in managing the portfolio as the turnover ratio stood at more than 2 times. The fund was underperforming its benchmark the S&P CNX 500 over the one and three year time periods.
- Over the next six months industrial capital goods climbed to the first spot in terms of the sector exposure with a figure of just over 10 per cent of the portfolio. This was followed by software, banks and Pharma. The funds top holdings were TCS, Hindalco, Bharti Airtel, Kotak Mahindra and Tata Steel. The fund trimmed its turnover ratio to less than 0.8 but it did not help in reversing the underperformance that continued.
- At the end of December 2010 the industrial capital goods sector remained at the top of the list but this was followed by banks that moved past software to the second spot. Pharma and telecom services were the other sectors with a significant exposure. In terms of the individual stocks Reliance Industries was at the top followed by Cipla, BHEL, Bharti Airtel and Oracle Financial Services Software. The fund managed to become an outperformer over the one year time period but was still an underperformer over the three year period.
- The fund was now taking an aggressive approach as this was visible in the extent of the exposure to individual stocks as well as sectors as this had increased significantly. Banks was now the top held sector in the portfolio with an exposure of nearly 17 per cent followed by software and petroleum products both of whom had a double digit exposure. As far as individual holdings were concerned it was ICICI Bank at the top with a figure of nearly 8 per cent followed by Reliance Industries, Infosys, OIL India and Axis Bank. The fund was now an underperformer over the one, three and five year time periods.
- There was quite some change in the overall portfolio of the fund because while banks remained the top sector followed by petroleum products and software the turnover ratio climbed to more than 2 times at the end of December 2011. Glaxo Smithkline Consumer Healthcare was the top holding of the fund followed by Reliance Industries, ICICI Bank, Infosys and BHEL. The fund remained a long term underperformer over its benchmark.
- Investors can avoid this fund till the time that there is a sustained improvement in its performance as it has failed to maintain consistency. The nature of the fund increases the risk element and hence makes the fund unsuitable for those investors who want to follow a low risk buy and hold strategy.
Disclaimer: Views expressed in this article are entirely personal.
For full details of the fund including NAV performance, portfolio, and peer comparison click here.
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