The Hindu Business Line : Tata Equity Opportunities Fund: Invest

INVESTORS looking to diversify their portfolio may consider investments in Tata Equity Opportunities Fund. The fund's performance over the past five years compares favourably to funds such as DSP Opportunities Fund, Templeton India Growth Fund and Franklin Prima Plus. It has also consistently beaten its benchmark and the category average for diversified equity funds over the past three years.

Strategy: Tata Equity Opportunities now has a diversified portfolio that is almost equally divided between mid- and large-cap stocks. Stocks with a market capitalisation range of more than Rs 2000 crore accounted for about 47 per cent of the assets by end-September 2005.

The fund also tends to spread itself thin in terms of its stock-specific and sectoral holdings. The fund's top stock typically accounts for about 3 per cent of the portfolio. It typically holds 50-55 stocks, which seems a large number for a fund size of less than Rs 300 crore.

These features of the Tata Equity Opportunities Fund's investment strategy make it suitable for conservative investors, as blips in the prices of individual stocks in the portfolio will have minimal impact on fund performance. At the same time, exceptional stock calls are unlikely to show up in the performance, either.

Performance: The fund, in its earlier avatar as Ind Taxshield had, an unimpressive track record in the bull market of 1998-99, but stood its ground during the market meltdown in 2000 and 2001.

The five-year compound annual return on the fund stands at 34 per cent, placing it in the top quartile among diversified equity funds, ranked on the basis of five-year returns.

The climb in the performance rankings can be traced largely to its good showing over the past three years. It recorded returns of 123 per cent, 43 per cent and 61 per cent over each of the past three years.

In each of these years, it fared better than the category average for diversified equity funds.

The portfolio has undergone substantial churn over the past six months.