Mutual Funds

Birla Sunlife 95: Buy

Parvatha Vardhini C | Updated on February 23, 2014

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Have a low risk appetite? This could just be the fund for you



Investors can buy the units of Birla Sun Life 95 Fund (BSL 95), given its track record in delivering steady returns over the long term.

The fund is among the top performers in the (equity-oriented) balanced funds category in the last five years. Its 18 per cent compounded annual return over a five-year period beats peers such as Canara Robeco Balance and FT India Balanced, while being about 2-3 percentage points lower than toppers such as Tata Balanced and HDFC Balanced.

Performance and strategy

The returns stand on a par with seasoned diversified equity funds and the fund is an alternative to pure equity funds, for those with a lower risk appetite.

BSL 95 balances its holdings with acumen, pushing up equity exposures during market rallies and latching on to attractive debt instruments when markets turn volatile. The years 2011 and 2013 are good examples of how the fund braved falling and volatile markets by increasing holdings in corporate debt/PSU bonds.

Its exposure to these instruments moved up to over 25 per cent in late 2011 and stood in the 20-25 per cent range for most of 2013. It generally invests in AAA or AA+ rated instruments, keeping the risk low.

It compensates for this defensive stance on the debt side by sprucing up its portfolio with mid-cap stocks up to 15 per cent of its equity holdings, providing a leg-up to overall returns.

This probably explains the fund’s under-performance in the past one year, where the rally was driven by large-caps. But the positioning is helpful now, when large-cap valuations have run up and opportunities for value buys in the mid-cap space are available.

Portfolio

The fund generally has a diffused portfolio of 50-60 stocks on the equity side, with maximum holdings in individual names restricted to 3-4 per cent.

In terms of sectors, banks and software seem to be the fund’s favourites across market cycles.

It has increased its exposures to the in-form IT sector since July 2013, re-entering TCS and upping holdings in Infosys, and HCL Tech.

Besides IT, calls that have worked well for the fund in the past year are Hero MotoCorp, MRF and Tata Motors DVR in the auto space. Construction, metals (Sesa Sterlite, Gujarat Mineral) and telecom (Bharti Airtel) are some of the sectors it entered in recent times, indicating that the fund is looking for value in these beaten-down spaces.

Debt holdings as of January 2013 are at 27 per cent. AAA-rated instruments from HDFC, REC and LIC Housing Finance figure in the latest portfolio. Invest in the fund if you require consistent and moderate returns with a holding period of five-seven years.

Published on February 23, 2014

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