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Suresh Krishnamurthy

INVESTORS in ABN Amro Equity Fund can continue to hold their exposures. Its performance in the first six months after launch has been impressive. It has raked in returns of 35 per cent, beating the market in the process. Fresh investments can, however, be made after observing the performance over a longer period.

Performance: Since its launch in September 2004, ABN Amro Equity has not shown any signs of a `cash-drag'. In a rising market, newly launched funds find it difficult to match their established peers. This is because the proportion of cash in their portfolio is high relative to peers.

This `cash drag' makes newly launched funds underperform peers. Such a cash drag has not been evident in the performance of ABN Amro Equity. Its return of 35 per cent compares favourably with that of a number of its peers. Relative performance of the fund over the past three months is even better.

Portfolio: The fund is moderate in size with assets under management of Rs 226 crore. Similar to most new funds, this one too has had to contend with large-scale redemptions. The fund started off with about Rs 400 crore of assets under management; despite a sharp rise in net asset value, the fund's asset base is now roughly half its initial size.

Fortunately, large-scale redemptions have had no impact on performance.

The fund also does not have large cash positions. Cash and cash equivalents were about 5 per cent of net assets at the end of February 2005.

The fund sports a diversified profile with investments in only a couple of the stocks being more than 5 per cent of net assets.

The fund has 33 stocks in its portfolio. The bulk of the investments is in large-cap stocks.

The fund, however, has invested a sizeable proportion of about 35 per cent in stocks with market capitalisation of Rs 5,000 crore or lower.

About 9 per cent of net assets have been invested in stocks with a market cap of less than Rs 1,000 crore. This suggests that S&P CNX 500, and not the Nifty Index, is the more appropriate benchmark.

In terms of sector allocation, investments are concentrated. The top four sectors account for half the net assets.

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