It reduces exposure to equities when the market is high and gets fully invested when valuations are low, as the risk-return trade-off is better and opportunity is greater. The fund can fully get into equity or liquidate the holdings to zero. Over the past few years, its equity holdings dropped to 76 per cent.
The fund has a defensive nature underweight on domestic consumption, interest rate cyclicals. But, it bets on energy for being more conservative than commodities. The fund has tremendous flexibility, to shift between asset classes and market caps. It started as a large-cap fund, moved to mid-caps in 2003 and was back to large-caps in 2006.
Its performance has not always been impressive. But, over a 5-year period, this fund has a better potential to outperform than other funds.
