Birla Sun Life Equity: For risk averse eyeing steady return

Nature : Equity oriented diversified fund

Inception : August 1998

Assets under Management (June 30, 2011) – Rs 921 crore

Fund manager : Mahesh Patil

Fund House: Birla Sun Life Mutual Fund

Analysis

The fund was betting on banking as a growth opportunity way back in December 2008, when it had a 13% exposure to the sector. This was followed by telecom and petroleum products with 9.3 and 7.7% exposure. The fund however was not very aggressive in terms of the exposure to individual stocks as the top holdings like Bharti Airtel and Reliance Industries had an exposure of just around 6%. In terms of banks, the holdings were spread out between 3 private sector and 2 public sector banks.  At this stage the fund was outperforming its benchmark BSE 200 over all periods since inception.

Over the next six months the fund began to change its top exposure. While banking remained the sector with the maximum exposure, this tilted more towards private banks and within the banking portfolio two banks were added one went out.  Industrial capital goods and power with 9% exposure each were the next two sectors in terms of the top exposure. Bharti Airtel, Reliance Industries and Infosys were the top holdings and the going was good for the fund as it was comfortably outperforming its benchmark.

At the end of December 2009 banks with 12% exposure was the top sector followed by Software and Power.  What was significant was that the fund added a lot of holdings including several small and mid caps during this period. The exposure to the top stocks was also thus down to 4% as Infosys, ITC, Reliance Industries, TCS were among its top holdings. The performance of the fund continued to be robust but there was only a small outperformance for the three and one year time period. 

Six months later the situation did not change much as banks remained the top sector followed by power, software and industrial capital goods. There were now a total of 8 banks in the portfolio. The existing investment strategy was paying off well and fund was outperforming its benchmark in the short term with an annual return of 32%. On the three year returns charts though, the fund was now slightly trailing its benchmark.

In December 2010 the fund had 3 banks including 2 public sector ones State Bank of India and Bank of Baroda in its top 10 holdings. The Top holding was ITC but what was significant was that the top holdings were all below 4% in terms of exposure. The strategy of relying continuously on the banking sector that had helped the fund was however was now going against it as it began trailing its benchmark on the one year and 3 year time horizon.

The fund changed its strategy and while ICICI Bank remained the top holding at the end of June 2011 there was no other bank in the top 10 holdings. Further there were now 2 pharma and 2 IT companies in the list. Old favourites like Reliance, ITC and Bharti Airtel continued on the holding list but were also joined by L&T. The fund recovered ground on the 3 year time horizon but was still trailing on the one year time period.

The fund is a steady performer with a long term strategy. Investors who are looking for long term stability can look towards this as an investment opportunity. Aggressive investors should stay away because they will find better opportunities suited to their style of investment elsewhere.

For full details of the fund including NAV performance, portfolio, and peer comparison click here 

- Arnav Pandya