The Hindu Business Line : ABN AMRO Opportunities Fund: IT out of favour, oil in

In highly volatile markets, if a fund has the flexibility to invest across market capitalisations, it has an edge over diversified, cap-specific funds. If a fund has a mandate to take a concentrated exposure, it has an advantage in markets that are not in a secular bull run. In 2007, the markets were driven by few sectors, such as construction, capital goods and power.

We take a look at ABN AMRO Opportunities Fund whose mandate permits it to take focused bets on a few sectors. The key changes in the fund’s portfolio over the past six months has been the decline in exposure to software and increased exposure to sectors such as telecom services and energy companies. The key sectors preferred by the at the end of March 2008 were banks, energy(petroleum) and telecom service providers. For a six-month period ended March, the fund pruned exposure to construction, media and entertainment, industrial products, cement and finance. During the same period, exposure to auto, petroleum, telecommunication, ferrous metals, auto ancillary and banks was increased.

Sector rejigs: Over this six month period, exposure to the banking space fluctuated considerably. Asset allocation to the sector moved up from 12 per cent to as high as one-fifth of the total assets. As the banking stocks faced a correction in March, the fund’s exposure to the space fell. Holdings in Punjab National Bank were pruned by more than 40 per cent in the last quarter. The fund took a similar stand in Oriental Bank of Commerce.

The weight of the petroleum sector in the portfolio was doubled in the last six months. Reliance Industries continues to be the most preferred stock across equity funds and ABN AMRO was no exception. The stock slipped out of the top slot in the portfolio, but still cornered 7.5 per cent of the assets by March. Indian Oil Corporation and HPCL were the new faces.

Holdings in Bharti Airtel were enhanced substantially and cornered 8.2 per cent of the portfolio. The Auto Ancillaries segment is represented by a lone mid-cap stock Exide Industries. Auto stock Mahindra and Mahindra cornered 3.9 per cent of the assets.

Media and entertainment sector has lost the favour of the fund and its weight was brought down from 8.8 per cent to 3.9 per cent. To reduce allocation, the fund pruned exposure to stocks of UTV Software and Dish TV. Zee Entertainment and Television Eighteen India moved out.

In the oil and gas space, the fund preferred to cut exposure to ONGC and instead added Cairn India to the portfolio. Exposure to the IT sector has been cut drastically in the past six months, from 18 per cent to 2.8 per cent.

Cash positions which were at 10 per cent levels in September 2007 have been brought down steadily and the fund is almost fully invested now.

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