Skip to main content

Mutual Fund Review: AIG India Equity

 

Though its start was not at all impressive, AIG India Equity is beginning to get noticed and now shows potential

 

Though around for just two years, if one looks at its performance, there is a clear demarcation. In all its six quarters till December 2008, the fund underperformed its category average every time, barring one quarter where it equalled it. It began to put its best foot forward only from 2009. In all the five quarters since then, it has outperformed. Further, if one takes a look at the portfolio, another clear cut distinction emerges in June 2009. Here the transformation was the result of Huzaifa Husain replacing earlier fund manager Tushar Pradhan.Husain wasted no time in significantly revamping the portfolio. Fourteen stocks were offloaded which never made an appearance after that (barring HDFC) and 19 new entrants featured. The portfolio reshuffle was based on the premise that domestic recovery would be stronger than global recovery. Hence, stocks dependent on global economic cycles, such as commodities, were given less attention as the focus shifted to domestic stocks, especially in the consumption and investment space.

 

This resulted in a dramatic alteration of the sector allocations. Energy saw its allocation move from 15.26 per cent (May 2009) to 2 per cent (June 2009) with RIL and ONGC exiting. "This was based on our view that global recovery, on which oil price movement is dependent, was weaker than domestic recovery. Also, the under-utilisation of energy producing infrastructure globally was a concern as this has a negative impact on margins. Hence, we decided to avoid the sector," Husain explains. Increased allocation to Auto took place on the back of Hero Honda. Exposure to Services also began to rise.

 

Another significant change was in the market cap tilt. Allocation to large caps was lowered by 15 per cent and small caps by 7 per cent. Mid caps began to corner 46 per cent of the portfolio. Since then the fund has tilted towards mid caps with a decent exposure to large caps. As mid- and small-cap stocks rallied in 2009, the lowering of the large-cap exposure helped.

 

The fund has completely exited Healthcare and Communications. Currently, the top sectors of the fund are Auto, Services and Metals while the top three of its peer-set are Financials, Energy and Technology. This throws up the question of whether Husain is by nature a contrarian investor and a top-down one at that. But his demeanour indicates that he is totally against such branding. In his case, the sector allocations are simply a result of the process of bottom-up stock picking, which he swears by. "No active sector allocations are done. Typically, we may invest in one or two companies in any sector but we then take a big position once we are convinced of the stock. This individual stock allocation perhaps, at times, makes it look like a sectoral allocation. For example, the weightage of Media in the index is very small but if we like a particular stock, our allocation can be significant and, thereby, the sectoral allocation looks large."

 

His underweight stance in Infotech was probably a drag on last year's performance and the increased allocation this year is noticeable, especially since it is on two stocks. But going in line with how he describes his investing stance, he says it is not a sector bet. "This is a call on investing in companies which have either strong execution abilities or a good product and can gain market share profitably," he says.

 

This is a fund that would probably complement the other equity diversified funds in your portfolio. Unlike others, there is no Reliance Industries, ICICI Bank, HDFC Bank or Axis Bank as the top five holdings. The fund manager tries to generate out-performance by investing in select few quality picks, not by investing in risky small caps. So though the portfolio is a bit compact at around 26, it would be wrong to classify it as aggressive. In fact, when talking of his stock selection process, Husain does have a more cautious slant. "We prefer companies with conservative accounting policies. This typically reduces near term profits but provides consistency in profits which are rewarded by the market in the long term. Among our top 10 stocks for example, at least four of them have much faster depreciation policies than their peers," he says.

 

By and large, Husain managed to impress in 2009, despite managing the fund for just around half the year. While it can be debated that the timing of his takeover helped, since the rally began in March 2009, there is no arguing with the numbers. Thanks to the changes that he implemented, its 1-year performance (April 30, 2010) speaks wonders; a return of 78 per cent (ranked 7 out of 69) while the category average stands at 64 per cent.

 

While the change at the helm looks promising, one would have to see how he performs in a downturn. But we are willing to go with the view that this fund is in safe hands.

 

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now