The fund's flexi-cap mandate saves investors the trouble of switching allocations between large-cap and mid-cap funds on an ongoing basis.
Investors can retain their current holdings in Birla Sun Life Equity Fund (formerly Alliance Equity Fund) as the fund has been one of the consistent performers in the diversified equity category. It figures in the top quartile within equity fund rankings, over one, three- as well as five-year time-frames, and has beaten the category average over each of these periods.
Over the past year, the fund has generated a return of about 19 per cent, staying ahead of bellwethers such as the Sensex and the Nifty. Its five-year annualised returns, at about 45 per cent are well ahead of the benchmark BSE-200, which managed 34 per cent over the same period.
Returns for investors in the SIP (systematic investment plan) have been even higher, at 53 per cent. The higher SIP returns suggest that the fund's NAV has been quite volatile, especially on the downside. Investors in the fund thus have to be prepared for higher risks associated with volatile returns.
Suitability: The fund appears a suitable holding for the core portfolio of investors on account of its track record and its flexicap investment style. This mandate allows dynamic allocation across large-cap and mid-cap stocks and saves investors the trouble of switching allocations between large-cap and mid-cap oriented funds on an ongoing basis.
Though large-cap stocks have consistently accounted for over two-thirds of the portfolio, the fund has quite actively shifted allocations in the residual portion of the portfolio. The fund has also used its flexicap mandate quite effectively.
For instance, after maintaining a 20-25 per cent allocation to mid-cap stocks in the early part of 2006, it cut back on its mid-cap exposure to 18 per cent levels in the run-up to the May 2006 correction. Thereafter, the allocation to mid-cap stocks moved up from about 18 per cent of the assets in mid-2006 to about 28-30 per cent at the end of 2006 and early part of 2007.
About a fourth of the portfolio is currently invested in mid-cap stocks. This strategy could have contributed positively to fund performance as recent months have seen substantial improvement in the performance of quality mid-cap stocks.
Portfolio: The fund has tended to take a very diversified approach to investments, with stock-specific exposures contained at about 5 per cent and sectoral exposures at about 10-15 per cent.
The fund's top sector exposures in recent months have been to telecom, software, engineering and private sector banking, all relative outperformers.
In recent months, the fund has also retained a debt/cash exposure of 10-15 per cent, probably helping to even out the volatile phases in stock prices. The asset size has risen from about Rs 400 crore to Rs 652 crore over the past year and fresh inflows probably explain the significant cash and debt position.
Fund facts: The fund was launched as Alliance Equity Fund in 1998 and taken over by Birla Sun Life in 1998.