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Mutual Fund Review: Birla Sunlife Frontline Equity Fund

Name: Birla Sunlife Frontline Equity Fund-Growth
Type: Open-Ended Equity Diversified
Fund Manager: Mr. Mahesh Patil & Mr. Nimesh Chandan
Inception Date: August 30, 2002


Birla Sunlife Frontline Equity Fund is an open-end growth scheme from Birla Mutual Fund and seeks to achieve long-term growth of capital, through a portfolio with a target allocation of 100% equity by aiming at being as diversified across various industries and or sectors as its chosen benchmark index, BSE 200. The secondary objective is income generation and distribution of dividend.

It invests in handpicked frontline stocks i.e. stocks which have the potential of providing superior growth opportunities ensuring all leading sectors of its chosen benchmark, thus resulting in a highly diversified portfolio. The scheme targets the same sectoral eights within its portfolio as the benchmark, the BSE 200. However, the fund actively manages the portfolio and has not always limited its choice of stocks to the benchmark providing a wider universe of investible stocks.
 

Though the scheme primarily focuses on top 200 corporates that comprise the benchmark the scheme has managed to deliver the superior performance over its benchmark. Its stock selection along with the momentum picks and rally in largecap stocks has aided the returns. The scheme has posted one year return of 37.5% and has consistently outperformed its benchmark. Its performance has been equally good in last six months and has returned 7.57% while peers lost 1.05%.

 

The scheme has witnessed tremendous growth in its assets under management from Rs 7.8 cr in July 2005 to Rs 81.95 crore as of now. However it has gone down by 50% in last six months. As per stated guidelines it could invest upto100% of its net assets in equity and equity related instruments and as on July 2006, the scheme has allocated 88.63% of its assets in equities and rest in cash and equivalent. Average equity allocation in last one year has been at 91.11% of assets under management of the scheme. However cash exposure of the scheme has gone up in last few months seeing the volatility in the equity markets. It went as high as 22.68% in the month of May when equity markets witnessed sharp correction of 13.6% and again went down to 9.81% when markets showed some signs of recovery in June.
 
 
 
As on July 2006 the scheme has a well diversified spread across 36 stocks and exposure to any single stock is restricted to less than 7%. Top 10 holdings constitute 40.41% of the equity portfolio with Infosys in top place. Other than Infosys top holdings are SBI, Crompton Greaves, Mc Dowell & Company and Syndicate Bank. This month it made fresh exposure to McDowell& Company and Taj GVK Hotels while exited from the stocks of Reliance Energy, IDBI and M&M. Top 5 sectors account for less than half of the equity portfolio and over a period of one year it has further hiked exposure in Diversified, Electrical and Auto sector while trimmed in IT and Banking sector. BHEL, Reliance, Bharti and Infosys has been the fund's top choice in last one year and exposure to Infosys went upto 9% of net assets in equity.
 
Minimum investment required to enter the scheme is Rs 5000 and offers both dividend and growth options. The fund charges an entry load of 2.25% for investment amount less than Rs.5 crore, while no entry load is charged for investment amount equal to or greater Rs.5 crore. The scheme charges an exit load of 1% if redeemed within 6 months from the date of allotment. Expense ratio of the scheme is 2.5% as on June 2006 and is higher than the category average of 2.22%.

The scheme has primarily seen Bull Run but its performance in these three years has been impressive enough. Focussed investment strategy of investing in quality stocks across the leading sectors of the economy makes it a suitable choice for the conservative investors.
 

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