The Hindu Business Line : Fund Talk

I hold the following mutual funds: Reliance Equity Fund, Birla Infrastructure Fund, Fidelity Special Situation, Reliance Long Term Equity, HSBC Advantage India, HDFC Premier Multi-Cap, and Principal Infrastructure & Services Industries. I am interested in knowing which of these funds I should hold, keeping in mind my investment time-span of three years. Also, please recommend alternative options. I am also looking to invest monthly Rs 6, 000 in mutual funds for my two-year-old daughter's future. Kindly suggest funds that I should opt for.

Parag B.

Your portfolio can do with some re-jigging. Going by your choice of funds, you appear to be making most of your investments in new fund offers. Almost all the funds you hold were launched in 2006 and have witnessed a turbulent market since. Among the funds in your portfolio, Fidelity Special Situations and Birla Infrastructure have performed well over the past year, significantly beating the category average. However, the rest of the funds mostly figure in the middle of the fund rankings over a one-year period.

Your portfolio also lacks a pure diversified equity fund. Funds such as Fidelity Special Situations and HSBC Advantage India have investment styles that are suitable for investors with a more aggressive risk appetite, as they have a tendency to take concentrated exposures to stocks or sectors. If you hold on to these funds, you need to be prepared for downside risks in the event the fund manager's bet going wrong.

The same applies to infrastructure funds. You may consider exiting Birla Infrastructure and Principal Infrastructure & Services Industries. While we expect the infrastructure theme to play out over the next couple of years, we favour funds with a more broad-based approach to investing in the theme, such as DSPML T.I.G.E.R.

You can also consider switching from HDFC Premier Multi-Cap to HDFC Equity Fund. The latter has a good long-term track record and invests in a blend of large-cap and mid-cap stocks.

Reliance Long Term Equity is a close-ended fund. As you have a three-year horizon, you can hold on to the fund but its performance needs monitoring. You can use the exit window, which is open in the first five business days at the end of each calendar year in case the fund under-performs. However, you will also have to take the steep exit loads into account.

Reliance Equity's performance has been lacklustre. As it is too short a time-frame to judge its performance you can consider holding on to the fund but avoid fresh exposures.

For your fresh investments, we recommend investing in funds with an established track record rather than new fund offers. Funds such as Birla Sun Life Frontline Equity, HDFC Equity and Magnum Multiplier Plus might be good to begin with. You can consider adding Magnum Global for a mid-cap exposure.

(Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line, 859- 860, Anna Salai, Chennai 600002.)

Shanthi Venkataraman

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