The large-cap tilt and diversified portfolio make it a stable offering
Launched in 1998 as Tata Twin Option (Equity), the scheme got rechristened to Tata Pure Equity in 2000 when the balanced option of the fund was merged into Tata Balanced. The scheme aims at medium to long term capital growth, with 100 per cent equity investments in large-cap, liquid blue-chip companies.
The fund started with a large-cap bias but gravitated into being a mid-cap fund in 2003. However, the character of this fund emerged when M Venugopal took charge as fund manager in February 2005. He has maintained a large-cap bias that has never gone under 50 per cent and has created a well diversified portfolio. The mid-cap exposure comprises of bigger companies such as Ashok Leyland and Pantaloon Retail, which have all the necessary components to transform into future large-caps. "Approximately 15-25 per cent of the assets are in mid cap stocks," according to M Venugopal, fund manager, Tata Pure Equity. "This exposure is to balance the portfolio with a little higher risk," he clarifies. However, the mid-cap stocks are selected carefully to ensure that all stocks in the portfolio are of good quality and no undue risk is taken.
In 2010, the fund stood ahead most of its peers and benchmark. The speciality of this fund is its ability to not only outperform its peers in a rising market but also protect the downside when the market tanks. In 2008 it lost 49.21 per cent while the category average was down 52.97 per cent and Sensex, its benchmark was down 52.45 per cent. This was largely due to Venugopal's aggressive cash calls which touched 24 per cent in June 2008 at Rs 75 crore. The fund also took exposure in equity derivatives in 2008 to hedge better.
Our View
This long-run out performer has weathered many a storm and protected investors' money. During its long existence, there would be underperformance in some years and outstanding returns in others. But by and large, it beats the category average by a small margin and has set a good long-term track record. The large-cap tilt and diversified portfolio make it a stable offering.
