Reliance Vision's returns are pretty stable given its large-cap orientation. Investors with moderate risk appetite can consider this fund
LAUNCHED in October 2005, Reliance Vision is one of the oldest and largest diversified equity schemes of the industry today. With assets under management (AUM) worth 3,600 crore, this scheme is amongst the highly popular schemes of the mutual fund (MF) industry. Reliance Vision is the second largest pure diversified equity scheme from Reliance asset management, next only to Reliance Growth, which manages more than 7,600 crore of investor money.
PERFORMANCE:
During its 15-year long tenure till date, Reliance Vision has moved from being a top quartile performer, beating the market indices by huge margins, to just about an average performer, whose returns today can be easily aligned, more or less, at par with the indices. For instance, during the period 2002-2005, Reliance Vision's large cap orientation made it one of the fantastic performers with returns as high as 75% as against single-digit returns by the major market indices in 2002 and over 155% returns in 2003 when the indices returned about 75%-85%. Again, in 2004 and 2005, Reliance Vision could beat the market returns, giving it an edge over the other diversified equity schemes in the category.
However, the historic bull rally of the decade, which began to take shape in the year 2006-07, pushed down the rating of Reliance Vision as its large-cap orientation could not possibly compete with the roaring returns of the mid-cap and multi-cap category of schemes, which were undoubtedly, the absolute gainers of the market momentum then. In 2006 and 2007, the fund's returns of about 46% and 57%, respectively could be easily mapped to the similar returns by the major market indices, the Sensex and the Nifty, as well as the scheme's benchmark index, the BSE 100. In 2008, too, the fall in the fund's net asset value (NAV) by about 52% was at par with the decline of about 52% each in the Sensex and the Nifty in that year. The BSE 100 fell by about 55% in 2008.Unfortunately, however, even in 2009, the year of dramatic market recovery, the fund failed to outdo the benchmark returns. It earned 82% returns at par with about 81%-85% gains by various major market indices.
In fact, a brief look at the performance chart clearly displays the fund moving in line with the market since 2006. However, having said that, one also needs to contemplate the fact that Reliance Vision has not disappointed its long term investors, who have stayed invested with this fund for nearly a decade now. For the 10-year period, the fund has returned an annualised yield of about 30% per annum.
PORTFOLIO:
Reliance Vision's portfolio looks more concentrated with just about 34 listed stocks in its kitty, thereby increasing the risk per stock holding. State Bank of India (SBI), its current largest holding, alone accounts for nearly 9.5% of the fund's total equity portfolio.
The fund has also increased its exposure drastically in the healthcare space. This has gone up to 16% from about 12-13% at the beginning of the current calendar year. Its stock holding under this sector includes Aventis Pharma, Cadila Healthcare, Divi's Labs and Glaxosmithkline Pharma. Of these, the fund has been holding Divi's Labs for over five years now.
The fund reduced its exposure in the IT space from more than 10% at the beginning of the current calendar year to less than 8% in the following months. But it has once again begun to increase its holding in this space. This may be due to expectations of better performance by IT companies. Under the IT segment, it currently holds only TCS, Infosys and Financial Technologies, each of which have been a part of the fund's portfolio for at least over a year now. An analysis of the fund's current portfolio reveals that while the fund does indulge in regular churning of the portfolio, most of its current holdings are at least a year old. Given the fund's large-cap orientation, this strategy of holding investments for a fairly long term does make sense as large-caps are fairly liquid counters carrying little risk. Currently, 74% of the fund's equity portfolio is in the profit zone - quoting at a price higher than their cost of acquisition.
OUR VIEW:
Considering the performance of Reliance Vision, on a year-on-year basis, the scheme does not appear to have failed its investors. Its returns can be said to be pretty stable and in line with the market, given its large-cap orientation. As such, Reliance Vision is suitable only for investors with moderate risk appetite. A small concern, however, is with respect to its portfolio, which appears to be quite concentrated, especially given its large size.
