The Hindu Business Line : ABN AMRO Opportunities: Hold

Unitholders can retain ABN AMRO Opportunities, in light of its strong performance since its launch in April 2005. Over the past year, the fund has delivered a return of close to 60 per cent, beating its benchmark, the BSE 200, by an impressive margin.

ABN AMRO Opportunities has the mandate to invest across large-cap, mid-cap and small-cap ranges. This means that it has the flexibility to take concentrated exposures to any of the market capitalisation buckets, depending upon where the fancy lies. Funds such as Kotak Opportunities, Franklin India Flexicap and Reliance Equity Opportunities also follow this strategy.

Suitability: The success of a flexi-cap strategy, however, hinges upon a fund’s ability to time its entry into large-cap or mid-cap stocks. This, in turn, depends upon the fund manager’s perception of relative valuations and market’s risk appetite. As such, investing in flexi-cap funds is not necessarily a superior alternative to owning a mix of purely large-cap or mid-cap focused funds, in addition to regular diversified funds.

ABN Amro Opportunities also has the mandate to take concentrated exposures to select sectors from time to time. This is another reason why the fund may be suitable for more aggressive investors.

Further, there appears to have been a recent change in management. Investors will have to watch out for any changes in management style and performance before contemplating fresh exposures to the fund.

Performance: While the fund has delivered an annualised return of 47 per cent over the past two years, its performance has gathered momentum only in the past year. ABN AMRO Opportunities has maintained a significant exposure to mid-cap stocks; at least 30 per cent of its portfolio has been allocated to stocks with a market capitalisation of less than Rs 5,000 crore. The higher allocation to mid-caps tempered its performance in 2005 and most of 2006, when large-caps were at the forefront of the rally.

Since the June lows of 2006, however, the rally has been more broad-based, with select mid-cap and small-cap stocks even significantly outperforming their larger counterparts. While some of its peers have been reluctant to shift to mid-cap stocks amidst market volatility, however, ABN AMRO Opportunities has risen to the top by homing in on the right mid-cap stocks. Picks such as IFCI, Tanla Solutions, Asian Electronics, Jagran Prakashan and Elecon Engineering have paid off handsomely.

Portfolio overview: ABN AMRO Opportunities has a relatively smaller asset base of about Rs 400 crore which ensures greater manoeuvrability compared with peers such as Franklin Flexicap, which has an asset base of nearly Rs 3500 crore. The fund has an exposure to about 40 stocks. The portfolio is aggressively managed with frequent churning.

Software, real estate, banking and media are among the top sector allocations. Although software has been its top holding over the past year, exposure to the sector has not hurt performance materially.

More Stories on : Mutual Funds | Recommendation

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