The Hindu Business Line : DBS Chola Opportunities Fund: Hold

The fund has managed its size well, adopting a flexi-cap investment style that allows investors to benefit from active allocations to both large- and mid-cap stocks.

After turning in a sedate performance for a long spell, DBS Chola Opportunities Fund staged a significant improvement in returns the past year. Its return of about 21 per cent places it among the best performing diversified equity funds, amidst rather challenging market conditions.

A change in fund manager and a substantial restructuring of the fund's portfolio are probably the main reasons behind the recent performance. Unit-holders in the fund can retain their investments, while new investors can track the fund closely before they consider fresh investments.

Suitability: According to its investment objectives, DBS Chola Opportunities takes concentrated exposures to the high growth sectors of the economy. This makes the fund suitable only for investors with a high-risk appetite.

Theoretically, the fund's relatively small size (assets of about Rs 11 crore as of March), would also add to the risk element, as a very small fund size could be a constraint to portfolio diversification.

In reality, though, the fund has managed its size well and provided adequate diversification with a good sector spread. In fact, the top stock and sector exposures are quite like that of a diversified equity fund.

The fund adopts a flexi-cap investment style and this allows investors to benefit from active allocations to both large and midcap stocks.

Performance: DBS Chola Opportunities Fund, with a return of just over 20 per cent, has been among the handful of equity funds that outpaced the S&P CNX Nifty over the past year. The recent good performance has helped improve the fund's long-term track record, with its three-year returns at a compounded annual rate of 32 per cent, just ahead of the Nifty returns of 29 per cent over the same period.

The fund's track record since inception is less impressive, with compounded annual returns of 28 per cent; this trails the category average for diversified equity funds by some margin.

Over the past year, the fund has also been reasonably successful at containing downside risk, during the sharp declines in stock prices.

Portfolio strategy: Consequent to a change in fund manager, the fund has undergone a substantial restructuring of its portfolio over the past few quarters.

Over the last six months, the fund has initiated a thorough overhaul of its holdings, adding software, telecom and select capital goods stocks while trimming exposure to auto ancillary and diamond jewellery stocks.

The fund has also acquired a distinct large-cap bias, adding large-caps such as Dr Reddy's Labs, Hindustan Lever, Bharti Airtel and Infosys, while exiting several real estate, cement and smaller banking stocks.

The portfolio in March was predominantly large-cap oriented, with about 80 per cent of the assets in stocks with a market capitalisation of over Rs 5,000 crore.

The asset base has also improved over the past year to the current size of about Rs 11 crore; but remains relatively small within its peer group.

Fund facts: DBS Chola Opportunities Fund was launched in November 1997 and was among the first funds to be launched in the aggressive equity category.

The fund manager is Mr R. Rajagopal. The fund's benchmark is the CNX Nifty.

More Stories on : Mutual Funds | Recommendation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page