It's difficult not to like DSP BlackRock Equity fund. Ever since 2003 it has beaten the category average every year. Its charm lies in the fact that it impressed in both favourable and unfavourable market conditions.
The fund's performance in 2007 was impressive at 70 per cent (category average: 59%). A high mid- and small-cap exposure along with considerable allocation to Energy helped. What's even more impressive is that fund manager Apoorva Shah managed this return despite being heavy on Technology. In the crash that followed, he resorted to defensives and cash, though not abnormally high.
Ever since Shah took over (June 2006), its performance in declining quarters improved considerably. In the bear phase spanning January 8, 2008 to March 9, 2009, it shed 49.5 per cent (category average: 55%).
But when markets started rising in March 2009, Shah was not quick in lowering cash allocation and did so mainly in May. "We were caught unaware by the sharp rise," he admits. Neither did he go heavy on Construction, Metals or Financials, which boomed during that time. "The risk was not justified at this point in time," is Shah's explanation. As a result, the fund delivered 79 per cent (category average: 89%) when the market rallied from March 9, 2009 to August 31, 2009.
Right now he is focussing on Oil & Gas downstream and top quality IT Services. He is also positive on auto and consumer stocks. In Real Estate, Shah is focussing on "companies that have been able to raise funds which have helped them de-leverage, improve their balance sheet and have launched new projects at cheaper prices and got rid of their inventory of land."
If erring on the side of caution is typical of Shah's style, so is his rigorous diversification. Exposure to the top 10 holdings is generally capped at 35 per cent and allocation to the top three sectors remains below the category average. Under Shah's management, single stock allocation has not crossed 5 per cent, barring a few large-caps. The number of stocks too has gone up considerably, peaking at a high of 90 (August 2008), while it has averaged at 73 in the past one year.
The fund does take short term bets (nearly 40% of the stocks are held for less than 6 months) and in the long-term holdings, intermittent profit booking does take place.
