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Mutual Fund Review: Tata Infrastructure

 

 

Fund manager's smart sector picks keep Tata Infrastructure's performance on line with category average

What you find here is a huge and diversified portfolio with a distinct large-cap flavour. Even the derivatives exposure, which is not often, is never huge and only in Nifty Futures. Naturally, such a portfolio cannot be expected to deliver astounding returns, but will give investors a good night's rest and add to their bank balance.

 

This bent is the result of the fund's size. In a big fund, the top exposures by default have to be in larger stocks. A Rs 3,000 crore fund would have an exposure of Rs 120 crore to a stock if it amounted to just 4 per cent of its portfolio. Exposure to mid- and small-caps would have to be done wisely. Hence the top holdings are in large caps and the tail end of the portfolio is allocated to smaller caps. "Being a reasonably large thematic fund, we prefer to form a view and ride it out and do not keep shuffling the portfolio like a small fund. But there are ample good quality large caps, which form my top picks from a longer-term perspective," says Venugopal. While he does not churn his portfolio rapidly, he shifts positions amongst the top 10 stocks whose rankings change constantly.

 

After an impressive 2006, this fund's returns have been in line with the category average with a slight underperformance in 2009. But again, that was simply because funds with smaller-cap stocks rallied on ahead. By and large, Venugopal has always been on track with his sector picks.

 

For instance, the rally in Construction and Basic Engineering in 2006, where the fund held a total average exposure of 52 per cent. The next year, he increased his exposure to Metals, even when the sector was languishing, which paid off as it later gained tremendous momentum. Surprisingly, he got out of Construction pretty early in 2007. Had he stayed on in this sector, his returns would have been astounding. However, valuations were going haywire. In 2008, he dropped exposure to Financials between January and May but later increased it, a move that again paid off.

 

Though his exposure to Energy and Metals is now more or less in line with the category average, he is pretty bullish on Financials. He cites "reasonable valuations, strong growth in corporate banking, and credit growth as corporate capex improves" as the reason. Venugopal looks for strong growth companies, but does so cautiously. A sound bet and good track record make it stand out in this space.

 

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