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Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash

After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).

 

The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and Arpit Malviya who took over the reins in October 2007 made some significant changes in the portfolio that quarter. Engineering was introduced in the portfolio while Construction and Technology were two sectors from which a complete exit was made. Energy was reintroduced in December. The equity allocation too was increased.

The fund managers frequently churn the portfolio and show no hesitation in moving in and out of stocks. It's not unusual to see the fund enter a stock in one month and exit it completely in no time. A natural outcome has been the fairly rapid shift in sector allocations.

 

However, Omprakash is clear that needless churning does not take place. "There may be churning when money comes in or because of a valuation call, but it will take place in selected stocks. Since the size of the fund is reasonable we can do that to generate alpha," he says.

 

Although the fund has historically maintained a compact portfolio of less than 20 stocks, with allocation to a single stock exceeding 7 per cent on many occasions, a toning down has been noticed in recent times. Allocation to a single stock has not exceeded 7 per cent after 2008 and the number of stocks is now at around 30, due to the increase in the asset size. This year has also seen an increased exposure to large caps. On the debt side, the fund has largely stuck to cash and call money. It has only been recently that an exposure to debt paper has taken place with the bulk in Certificate of Deposits (CDs).

 

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