The fund has accomplished what it stated it would do and has made money for its investors. Launched in July 2005, it got off to a weak start. It delivered a meagre 11 per cent in 2006, underperforming both, its category and benchmark by huge margins.
But, come 2007, the fund began to make up for lost ground. Upadhyay took over in March 2007 and since then, the funds performance has been more than impressive. Over the three-year period ended February 28, 2010, it was the best performing fund in its category, with an annualised return of 20 per cent, double its benchmark (10.3 per cent) and category average (10.32 per cent).
The mandate of this fund requires Upadhyaya to dynamically shift between sectors, depending on the macro economic outlook and opportunities available in the market.
By and large, Upadhyaya attempts to keep around 65-75 per cent of his portfolio in four to five select sectors, which he believes will outperform the broader market in the short to medium term. He also sticks to a 70 per cent large-cap tilt and averages at around 40 stocks in the portfolio.
The high cash levels in the fund don't imply he is not fully invested but indicate derivative exposures. "We employ derivatives either to hedge part of the portfolio or employ it for reverse arbitrage trades. Also, entry and exit is easier in the futures market because of high liquidity," says Upadhyaya.
