Canexpo's mandate is to invest in stocks of companies with a focus on exports. However, it is clear from the investment strategy and portfolio allocations that fund management on the lines of that in a diversified equity fund, is not barred.

Still, the fund has chosen to maintain concentrated exposure to the pharmaceutical sector in the last six months.

This apart, the striking aspect of Canexpo has been the consistent churning of its portfolio. In terms of both sectors and stocks, exposures were constantly changed during the last six months.

Exposure to sectors such as banks, aluminium, commodity chemicals, oil and gas (refining) were hiked sharply in one month, only to be reduced in the following months.

In terms of stocks, small-cap stocks and mid-cap stocks attracted the fund manager's attention. Canexpo is a small fund with net assets under management of about Rs 25 crore.

This gives it the flexibility to invest in mid-cap and small-cap stocks. The fund has utilised this flexibility substantially.

Some of the small-cap and mid-cap stocks that figured prominently in the portfolio in the last six months are Cosmo Films, Hikal, Aurobindo Pharma, Matrix Labs, Divi Labs, Bongaigaon Refinery, IBP, Welspun Gujarat, Tata Telecom, Aarvee Denim and Jindal Iron.

The fund also invested in stocks that institutional investors generally tended to avoid over the years.

These include SB&T International, Bhushan Steel, Shri Adhikari Brothers, GTL, Granules India, Monnet Ispat, PSL Holdings, India Glycols amd IFCI.

Cumulatively, non-index and non-large-cap stocks, which accounted for about 33 per cent of net assets at the end of March, have accounted for nearly half of the net assets since then.

Some of these, such as Engineers India, Lupin and Cadila would defy the description of mid-cap stocks. However, by and large, investments in non-index and non-large cap stocks were in mid-cap and small-cap stocks. The stock selection and sector allocation exhibited in the last six months clearly suggest an aggressive tilt in the investment strategy.

However, despite the broad-based rally that was seen in the market, this aggressive strategy has failed to deliver competitive returns to the unitholders in the last 12 months.

As its long-term record is not too encouraging, investors can consider reducing their exposures to the fund.

Article E-Mail :: Comment :: Syndication