High returns, low risk and a diversified portfolio make this a worthy fund
This one's a winner. If compared with the benchmark, it has just one year of underperformance (2003) in seven years. From a relative point of view, it began to beat the category average only from 2006, a result of Patil taking over the fund in November 2005.
In 2009, it delivered 90.45 per cent (category average: 80.29%). Patil puts it down to many factors. "We got into good quality stocks at distressed valuations. We bought into certain stocks when the de-leveraging story began to play out and firms were able to raise money as liquidity eased. Prior to elections, we reduced cash and took a call that Infrastructure is one sector that will get a thrust, irrespective of who is at the Centre. We are diversified across sectors, and when the market picked, all moved up," he says. Its performance has not gone unnoticed. As assets under management (AUM) swelled, the outcome has been a more diversified portfolio with around 60 stocks (up from 35 in January 2009). Since 2008, apart from RIL, Bharti Airtel and Infosys Technologies, no stock has accounted for more than 5 per cent of the portfolio, while concentration of top five stocks has been lowered to around 18 per cent.
This fund attempts to target the same sector weights in its portfolio, as is found in its benchmark - BSE 200. But that does not mean the fund manager is restricted to the benchmark universe. His individual stock selection is totally flexible and there is also some flexibility in computing the sector weights; either ± 25 per cent of the weight in the index or an absolute figure of ± 3 per cent, whichever is higher.
While Patil broadly adheres to this strategy, there have been the occasional deviations such Energy and Engineering in 2006 and 2007. "We have always been positive on capital goods, specially power equipment companies. This sector will continue to grow and the outlook is bright with good support from the government and private sector participation," says Patil. But due to stretched valuations, he was underweight on Energy at that time.
Though Patil is positive on mid caps and allocation to them has risen recently, he ensures that this fund has a large cap thrust. Higher than average returns, lower risk and a well diversified portfolio make it a sound proposition.
