The Hindu Business Line : JM Emerging Leaders: Hold

Investors can retain their units in JM Emerging Leaders as the fund has witnessed a turnaround in performance over the past six months. The scheme has seen a change in fund management twice since its inception two years ago.

The fund, launched during a bull run in July 2005, returned 30 per cent up to April 2006. With the market correction in May 2006, it underwent a bad patch for the next one year.

For most of this period, the fund trailed its benchmark BSE 200 by 30 percentage points and added just 2 per cent to the NAV.

Despite its mandate to invest across market capitalisation, it did not capitalise on this during the above period, leading to underperformance.

As the fund is yet to prove performance over a sustained period, any large exposure should be avoided.

Improving performance: After a change in fund management in December 2006, the fund stepped up exposure to capital goods and engineering during the early part of this year and allotted close to 25 per cent of the assets in this sector but pruned it quickly. However, it appears to have kept away from sectors such as power and banking that witnessed market support in the recent months.

During the past six months, the fund’s selection of stocks helped it return 42 per cent, outpacing the benchmark by ten percentage points. During the same period, the assets under management surged five-fold.

Portfolio Overview: The fund has a compact portfolio of 21 stocks. Top ten stocks cornered 60 per cent of the assets while cash holding stood at 16 per cent.

Consumer non-durables, which under performed broad markets, had a sizable allocation in the portfolio over the past one year. But the selection of stocks in this sector — Gitanjali Gems and Hanung Toys and Textiles — accelerated overall performance.

In the engineering space, Emco was another stock in the portfolio that returned well after a well-timed entry.

The large-cap stocks present in the portfolio include Tech Mahindra and Century Textiles and Industries.

Fund facts: Mr Sandip Sabharwal manages the fund whose asset under management was Rs 380 crore as of October 2007.

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