In March 2007, this fund was in doldrums. It had underperformed its benchmark and category by huge margin in its initial days (delivered only 11 per cent in 2006). Over the three-year period ended July 31, 2010 this schemes annualised returns of 14.37 per cent made it the second best performer in its category. These returns are more than double of its benchmarks 6.09 per cent and category averages 6.24 per cent.
The fund scouts for opportunities depending on the macro-economic outlook. Hence it shifts between sectors dramatically. Its strategy is to hold onto a sector until there is a huge valuation gap between that sector and the market. On the other hand, it looks out for some fundamental development, which is negative in the sector leading to a sell-off or shift sectors if some other one looks good.
At any given point in time 65-75 per cent the funds portfolio is made up of four to five sectors that the fund manager believes will outperform the broader market in the short to medium-term. The portfolio has a 70 per cent large-cap tilt and averages around 40 stocks.
The fund manager also resorts to high cash levels but that doesnt imply that he isnt fully invested. It means that he has exposure to derivatives, which is either done to hedge part of the portfolio or employed for reverse arbitrage trades. Another reason for this is that entry and exit is easier in the futures market because of higher liquidity.
Overall, the fund has seen its ups and downs, but has managed to do what it set out to achieve - earn money for the investors.
