A long record of good performance across market cycles, a blue-chip bias and deft juggling of sectors make Birla Sun Life Frontline Equity a good choice. Its ten-year annual return at 22 per cent beats its benchmark BSE 200 by a good 5 percentage points.

In the choppy markets so far this calendar, the fund dropped 8 per cent against the benchmark’s 10 per cent fall despite being heavily invested in banking stocks.

What worked in the fund’s favour was a good share of software, consumer non-durables and pharmaceutical stocks besides select picks, such as M&M Financial Services, Bharti Airtel and Reliance Industries.

Among large-cap oriented funds, Frontline Equity ranks as a top performer. Investors can add units of the fund as part of their core portfolio. Note that with a tilt towards blue-chips returns will not be spectacular in mid- and small-cap driven bull markets.

Performance

Over the one, three and five-year timeframes, the fund has soundly beaten the BSE 200 by a margin of four to six percentage points. It has also done better than the Nifty to a similar extent.

The fund manages market corrections equally well. In the drawn-out bear phase of 2008-09, for instance, the fund dropped 9 percentage points lower than its benchmark. Moving into cash and debt in times of correction helped contain the losses while also leaving enough funds to buy up equities as the markets began to recover.

For instance, by the end of the 2011 correction, the fund held 11 per cent cash and fixed deposits. This was quickly deployed when the markets revived, with the March 2012 equity exposure going up to 95 per cent.

Over the past ten years, the fund has bettered its benchmark a whopping 92 per cent of the time on a yearly rolling return basis. It is this consistency and the ability to contain losses that make it an attractive fund today.

Portfolio

More than 80 per cent of the fund is held in large-cap stocks (market capitalisation of over Rs 7,500 crore). The fund aims at maintaining a sector exposure along the lines of the BSE 200, giving it a wide sector presence.

Exposure to banking stocks, the top sector holding, has been cut since the start of this year — a prudent move after building up exposure in 2012 when banking stocks had a good run.

Software stocks account for another large chunk, with picks in this space, such as HCL Technologies, TCS and Tech Mahindra working well. Other timely sector calls include FMCG, power, auto ancillary and energy.

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