Smart bets on the debt portfolio added zing to Reliance MIP's performance over the past five years
This fund has managed to be a top quartile performer in four years, out of the five of its existence. And while investors may encounter hiccups, it has the ability to bounce back.
Since its launch to 2006, the fund's average portfolio maturity was in line with the category average, barring slight deviations. From 2007 onwards, the fund manager has played opportunistic bets. In the second half of 2007, he began to increase the average maturity from 2.52 years (June 2007) to 7.99 years (March 2008). The category as a whole moved much more gradually. Although, 10-year benchmark yields came down slightly in the second half of 2007, it started moving up from January 2008. With no interest rate cut in the credit policy review of January 2008, yields moved up and the fund got hit in the first quarter that year.
But that did not stop the fund from delivering an enviable 9.57 per cent return (category average: -3.42%) in 2008, which bagged it the No. 4 slot (out of 59). While equity allocation fluctuated between 20 per cent and 6.74 per cent, it was the bets on the debt portfolio that made its day. When the yields began to decline towards the end of 2008, the fund manager increased the average maturity of the portfolio from 1.27 years (June) to 10.24 years (December). The category average maturity increased from 1.48 years to 3.34 years over the same period.
The fund's equity allocation fluctuates. Its fund manager also actively churns his portfolio among stocks of all market caps. While earlier it was aggressive on the equity front, now it has a more diversified portfolio. Currently, the fund holds 34 stocks in its equity portfolio with none accounting for more than 1 per cent of the portfolio, while earlier there have been instances of allocation to a single stock going up to around 7 per cent (April 2006).
If one looks at the quarterly performances, there are a lot of ups and downs, as a result of which the dividend too fluctuates. However, a look at the annual performances and returns over a longer period indicate that it evens out. While the amount of dividend declared varies, the fund has managed to declare one in 65 months out of the 77 of its existence.
Over the past six months there has been a welcome dip in its expense ratio from 2.02 per cent to 1.61 per cent, below the category average of 1.72 per cent.
