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

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...

Term insurance

Term insurance may not be the most-marketed product by life cos, but it’s a must-have in today’s risk-prone lifestyle WHEN was the last time your insurance agent sold a term plan to you? It’s not a very popular policy among agents, as their commission in absolute terms is low because of the low-premium. Just as agents have their self interests in mind while selling, you need to make your own decision about your insurance needs, which are unique to your family. COST ADVANTAGE A term plan is pure protection. It is the cheapest type of life insurance policy. But what you see might not be what you get, most insurers have a range of health parameters for standard rates. If any of your health parameters — weight, blood pressure for instance fall outside this range, you will pay more. For some companies, the standard range is very narrow. EARLY BIRD GAINS A 30-year-old will pay 15% more premium than a 25-year-old. At 40, the premium is double of what is applicable for a 25-year old, points...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Reliance Life Insurance company introduces 17 ULIPs

Reliance Life Insurance company has announced the launch 17 unit linked insurance plans (Ulip). The new range of Ulips encompasses several categories including child plans, pension, protection, savings and investment, which are available in two versions — basic plan with tenure of over 15 years and another with a 10-year-term. According to an official release, these Ulips are primarily targeted at customers paying a premium of over Rs 10,000. All these schemes come with features such as capital guarantee, loyalty additions, higher internal rate of return and several fund options. The plans also offer riders, including payment of lump sum on diagnosis of specified critical illnesses, surgeries and additional life cover. Policyholders have the option of choosing between automatic asset allocation, systematic transfer plan and return shield options. Recently, the company launched two traditional insurance plans — Reliance Jan Samriddhi plan (RJSP) and Reliance Traditional Super InvestAssu...

L&T Tax Advantage

Best SIP Funds to Invest Online   The fund follows a growth approach to investing in quality stocks that have a large-cap tilt This large-cap tilted ELSS has fared consistently and fared better than its benchmark by posting a higher margin of outperformance. The fund follows a growth approach to investing in quality stocks that have a large-cap tilt, which is evident in its portfolio. The portfolio is further well diversified across market capitalisation and sectors with over 60 stocks finding a place in it. The upside with this fund is the fact that it has witnessed both down and up cycles of the market to come across as a winner in the long run. Do not doubt the fund based on its size and a few mediocre years of performance, because when analysing its rolling three year returns, the fund's performance stands out to qualify as a must have ELSS in one's portfolio. Stay invested through the lock-in and there are chances of benefiting from returns as well as tax savings will prov...
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