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Mutual Fund Review: Birla Sunlife Frontline Equity

 

From being a reasonable performer, this fund started to beat the category average by good margins after 2006.

The fund attempts to hold stocks matching the sector weight of its benchmark -BSE 200 index. But the fund picks up stocks in and and outside the benchmark. The fund is allowed flexibility with sectoral weights: ± 25 per cent in the index or an absolute figure of ± 3 per cent, whichever is higher.

The fund has stuck to its strategy. Though it deviated with energy and engineering (in 2006-07) for it was positive on capital goods, especially power equipment. But it was underweight on energy due to stretched valuations.

In 2009, this fund really came into the limelight, with a stellar performance of 90.45 per cent (category average 80.29 per cent). Due to higher returns, it was sought by a large number of investors and its assets under management (AUM) grew substantially. Then the fund diversified from 35 to 60 stocks in one year.

However, the portfolio still remains concentrated. Apart from Reliance Industries, Bharti Airtel and Infosys, no stock has accounted for more than 5 per cent in the last two years. And, concentration of the top five stocks has been lowered to around 18 per cent.

A large-cap thrust in a diversified portfolio and higher than average returns at a lower risk helps this scheme.

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