A large AUM has not hampered Reliance Growth's performance so far
Fund Manager Singhania claims that his aim is to "generate alpha, maintain consistency and do better than the benchmark, all of which will create value over the long term". He certainly has achieved it. The largest in its category in terms of assets, Reliance Growth is also the best performer when one looks at the 5-year period ended April 30, 2010. Ever since 2001, this fund has beaten the category average every single year.
One would expect a fund in this category to crash in the carnage of 2008. Not so. Its fall of 54 per cent was not too harsh in comparison with other funds and certainly less than the category average (-60%). What came to the fund's rescue was the aggressive cash calls, exposure to derivatives and a highly diversified portfolio. Apart from Metals, none of the sectors accounted for more than 10 per cent of the portfolio.
However, 2009 turned out to be a different story. At 97 per cent, the fund's return equalled the category average. This was not due to bad stock picking but simply because Singhania decided to tread more cautiously. The reason for that performance could have been the decision to gradually lower equity exposure, which even in April 2009 was 77 per cent despite the market picking up in March. Large-cap exposure also averaged 43 per cent between April and December (category average to large caps in 2009: 22%). But Singhania achieved his objective of beating the benchmark BSE 100 by a margin of 12 per cent.
The fund manager chases growth but is emphatic about the fact that he does not adhere to a quick entry-exit policy with this fund and actually sticks to a buy-and-hold philosophy. "Good stock picking and a very low turnover is what has contributed to this fund's success," claims Singhania. Jindal Steel & Power, Reliance Industries Ltd, Divi's Laboratory and State Bank of India are some of the long term favourites. Though Financial Services has been one of his favourite sectors for a while, Metals and Energy are the others he is betting on. Despite being wary of Construction, he does claim to have an exposure through holdings like Jai Prakash and Jindal Saw Mills.
The fallout of the huge asset base has been a diversified portfolio where around 16 per cent (1-year average) of the stocks held have an allocation of less than 1 per cent.
Allocation to a single stock has rarely exceeded 5 per cent.
