This multi-cap fund has excelled in all types of market conditions
Consistency is the virtue of this fund. Over the past seven years, this one's annual outperformance, with respect to the category average and benchmark, has set an impressive track record.
Though benchmarked against the Nifty, it's not a pure large cap holding. In the past, it has actively changed its complexion from being a large cap holding to a mid cap holding, depending on market conditions. In its long history, the large cap allocation has wavered from 89 per cent to 39 per cent. But ever since Shah took over in 2006, he has attempted have a 50 per cent large cap tilt. "The fund is actually a combination of two funds: Top 100 and Mid & Small Cap, hence the portfolio is a combination of these individual portfolios," he says.
The outcome of such a strategy is a rigorously diversified offering. Allocation to the top three sectors remains below the category average. Gone are the days when the portfolio held just 22 stocks with the top 10 holdings accounting for nearly 75 per cent. Under Shah's management, single stock allocation has never crossed 5 per cent, barring a few large-caps. Exposure to the top 10 stocks is currently at 26 per cent. Out of the 87 stocks in its portfolio, 50 have an allocation of less than 1 per cent. Though such diversification does raise questions, Shah is of the opinion that "the market has a lot of breadth so we want to capture different segments of the economy which is very broad." Shah actively churns his portfolio. Though he claims to do so only on the large cap side of the portfolio and adopts a more or less buy-and-hold strategy for the smaller fare.
Shah handled the market rally in 2007 and the market crash in 2008 very well. But when the market began to rise from March 9, 2009 onwards, he was caught unaware by the sharp rise. It took him a while to lower cash allocation and neither did he go heavy on Construction, Metals or Financials, which boomed during that time. As a result, the fund lagged behind.
"With a defensive portfolio, we could not catch the market turnaround hence we underperformed from March to June. Then we repositioned our portfolio to look at growth." It worked. In 2009, he outperformed the category average yet again. The charm of this multi-cap player lies in the fact that it has impressed in all market conditions. The result being that it's an impressive long-term performer.
