If you think that equities may take a breather after the stellar rally seen in the last few months, it may be time to fall-proof your portfolio. Birla Sun Life Frontline Equity is one fund which will not only cushion your portfolio during turbulent times but also deliver healthy returns over a three- to five-year timeframe.

The scheme has managed to sustain healthy top-quartile returns over three-, and five-year timeframes.

It has bettered its benchmark, the BSE 200 Index, and its category average across one-, three- and five-year time periods. The fund also scores high on consistency. In the last five years, the fund’s one-year returns have been higher than the benchmark almost 96 per cent of the time.

It has not only outperformed the BSE 200 Index during rally phases but has also been successful in containing downsides during corrective phases.

The scheme’s expense ratio of 2.17 per cent is much lower than that of its peer funds.

Deft churn

Swift sector moves during volatile times helped the fund stay ahead of competition.

For instance, it increased exposure to stocks in the financials space in November 2012 (27.5 per cent) expecting a moderation in interest rates.

But sensing the rate-hardening measures by the RBI to tame inflation, Birla Sun Life Frontline Equity quickly reduced exposure to the sector by March 2013 (23.6 per cent).

A systematic monthly investment in the fund over the last five years would have yielded annual returns in excess of 19 per cent. Though Birla Sun Life Frontline Equity Fund’s current portfolio has a higher cyclical slant, its past performance provides comfort over the fund’s ability to change course, should the market turn volatile.

Currently about a fourth of the fund’s assets are invested in defensive themes — IT, pharma and consumer goods.

Also, the fund’s mandate to limit deviation in according weightage to its holdings across sectors vis-à-vis its benchmark disallows it from taking too many aggressive sector bets.

For instance, if the benchmark holds 10 per cent in IT stocks, the fund can invest between 7 and 3 per cent of its assets in IT stocks.

The fund held 65 stocks in its portfolio as of May; this reduces concentration risk.

In the last one year, the fund has increased exposure to stocks in the banking, oil and gas, materials and construction projects space. A faster-than-expected recovery in the country’s economic prospects will aid the fund’s performance.

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