Unit-holders can consider paring their exposure to Birla Sun Life Equity Fund (Birla Equity), given its lacklustre performance in recent times. Over the last one year, the fund has drastically underperformed not just its peers but its benchmark, BSE 200 as well. Even over three- and five-year periods, the fund's performance fails to impress, with it just about managing to keep pace with its benchmark. A switch to Birla Dividend Yield Plus fund may instead be considered.

Performance : Birla Equity has managed a compounded annual return of over 6.8 per cent and 15.2 per cent over a three- and five-year period; its one-returns are a modest 3 per cent only. In comparison, peer multi-cap funds such as HDFC Growth, Fidelity Equity, and Franklin India Flexi Cap have recorded double-digit returns across the three time-frames.

What also underscores our recommendation is the fund's relatively poor performance during market corrections. Though the fund managed to stem the fall in its Net Asset Value (NAV) better than its benchmark in 2008, peer funds managed to put up a better show. Even during the volatile markets in 2010, the fund scored poorly over peer funds. To the fund's credit, however, it had delivered better than its peers during the rally from March-2009 lows. Besides, the fund has experienced varied market cycles, what with it being among the select few funds that can boast of a track record of over 12 years.

Portfolio & Strategy : Though the fund follows a multi-cap strategy, it typically maintains a large-cap bias. While a large-cap bias would have helped it arrest NAV slides over the year, it did not shield it from the broader market volatility, as a result significant exposure to other market cap segments.

For instance, the fund increased its mid- and small-cap stock exposure from 17 per cent and 21 per cent respectively in June 2010 to 19 per cent and 24 per cent by September 2010. While it did step down the exposure in later months, it did not help revive its scorecard. That the BSE Midcap and Smallcap indices have underperformed the Sensex by a considerable margin over the year may help put this in perspective.

In its latest April 2011 portfolio, the mid- and small-cap allocation is pegged at about 17 per cent and 16 per cent respectively. In terms of sector, banks, software and petroleum products make the top three. Notably, the fund's consistently maintained a high allocation to banks over the year.

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