The Hindu Business Line : Reliance Regular Savings

Investors with a high-risk appetite can hold their units in Reliance Regular Savings Fund (RSF) - Equity Option. A return of over 65 per cent in the past one year has placed the fund among the top performers in the diversified fund category over the last one year. However, a hold strategy may be appropriate at present, given a track record of less than three years and a change in fund manager in October 2007.

Suitability: Reliance RSF Equity has a high risk-return profile arising out of an aggressive management style and opportunistic exposures in the portfolio. Concentrated exposures to sectors as well as stocks also add to the fund’s risk profile.

The fund could at best be a supplement to improve portfolio returns. As the scheme does not offer a dividend option, investors would also do well to occasionally book partial profits to re-balance holdings in the fund.

Performance: The fund has managed to beat its benchmark BSE 100 by a wide margin over the one and two-year time frames. This margin, however, has been narrowing for returns since inception. Investors holding the fund since its inception in June 2005 would have earned an annualised return of 47 per cent as against the benchmark return of 46 per cent. The fund’s sluggish performance and huge cash holding in the initial 6-8 months after inception probably explain its sedate performance over a longer period. The fund, however, survived the correction in May 2006 well, declining lesser than its benchmark; its performance accelerated after the above correction with timely entries into attractively valued stocks.

On a monthly rolling return basis too, the fund has managed a relatively consistent show, trailing its benchmark in only nine out of the last 24 months.

Profile: Reliance RSF - Equity can be compared to the Reliance Vision Fund, in terms of active churning in its portfolio and short-term exposures to stocks. However, while the latter has a large-cap bias, Reliance RSF – Equity appears to follow a more multi-cap strategy with bias towards mid-caps, especially in the last six months. As of January 2007, less than 40 per cent of assets were invested in stocks with market capitalisation of over Rs 10,000 crore.

That the fund has been a favourite among the return-chasing investors is clear from the surge in its asset size over the past one year. Assets under management rose from Rs 125 crore in January 2007 to Rs 541 crore in January 2008. Barring August and September 2007 when it moved into cash, the fund has largely managed to hold over 90 per cent of assets in equities.

The fund may have been booking profits on some stocks during this period, even as the broad markets underwent some minor corrections.

Reliance RSF’s short term opportunistic exposure is evident in stocks such as ICRA (IPO) and Century Textiles. Further, only three of the 34 stocks at present had been retained in the portfolio for over a year, reflecting high portfolio turnover.

Mr Arpit Malaviya and Mr Omprakash Kuckien now manage the fund.

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