This fund is best suited for those who want decent returns with good downside protection
The fund has navigated through good and bad times to emerge as an impressive performer. The mandate demands an investment of at least 65 per cent of the portfolio in equity shares that have a high dividend yield at the time of investment. A look at the track record makes one wonder whether the fund manager follows this principle diligently. Its impressive performance in 2007 of 71 per cent put it ahead of the Sensex which managed 47 per cent and multi-cap category average of 60 per cent. Kulkarni hopped on to the Energy and Metals bandwagon by re-entering Tata Power and adding RIL, SAIL and Tata Steel. That year, the BSE Power, BSE Oil & Gas, and BSE Metal all delivered handsomely. But Kulkarni claims to have never deviated from the mandate. "Almost always 70 per cent of the portfolio will be in stocks qualifying as high dividend yield," she says. "Even in the peak of the bull run in January 2008 we were within these limits."
The objective is best suited to those who want decent returns with good downside protection, both of which the fund has given. Its fall in 2008 was less than that of the Sensex as well as the category averages (multi cap and dividend yield) helped by a substantial allocation to debt and cash. Come 2009 and the fund faltered because Kulkarni began to seriously up the equity allocation only from June 2009 onwards. "I was investing but between March and May the rally was substantial and there was an event risk ahead with the Elections, the results of which caught us by surprise. In hindsight, I can say that we were slow in deploying cash and our cash holding was a drag on portfolio performance for a while," she says.
But what has always worked for this fund is smart bottom up stock picking and sector allocation. And by doing that Kulkarni managed to marginally outperform the Sensex and the other two categories in 2009 as well. Her overweight calls in IT, Auto and Fertilisers helped along with "some good stock picking in Consumer, Engineering and Metal sectors". This year she has been holding cash at around 10 per cent and is looking at "deploying the fresh inflows into the fund in stocks fitting the criteria."
Besides scouting for companies which have sustainable cash flows, Kulkarni also looks at capital appreciation potential as the next filter. Using a multi cap strategy she has put to rest the notion that dividend yield funds can only impress during market downturns.
