The year 2017, so far, has been great for the markets. Indian equities have had a brilliant rally since the December 2016 lows. The Sensex and Nifty have not only clocked 15 per cent-plus gains over this period but have also scaled new highs. But concerns exist. For instance, asset quality worries for public sector banks and the slowdown in the IT services space could weigh on the market’s prospects.

In a volatile environment, multi-cap funds with the flexibility to juggle allocation across less-volatile large-cap stocks and high-risk and high-return mid- and small-cap stocks not only help contain downside during market falls but also help in long-term wealth creation.

Birla Sun Life Advantage is a good option if you have the appetite for some risk. The fund ranks in the first quartile among peers over three and five years. Its returns have been higher than its benchmark, S&P BSE 200 Index, by 10-12 percentage points over one, three and five years.

The fund scores well on consistency too. Its daily one-year returns over the last three years have been higher than its benchmark almost all the time. The same for the five-year period was 72 per cent due to the weak performance during the period prior to September 2013.

Turnaround

The scheme’s performance has since witnessed a turnaround. Higher allocation to mid- and small-cap stocks by end 2013 aided the good run. The fund on an average had invested 25-30 per cent of its assets in stocks with market capitalisation of less than ₹10,000 crore during this period. Also, the scheme’s agility in increasing exposure to themes such as financials and automobiles in 2014-15 helped.

Increasing exposure to large-cap stocks during volatile phases helped the scheme contain downsides. Between December 2014 and April 2015, the fund increased allocation to stocks with market cap exceeding ₹10,000 crore from 67-68 per cent to 75 per cent, ahead of the start of the corrective phase which lasted until early 2016.

Currently, nearly 95 per cent of the scheme’s assets are invested in stocks with a market cap of over ₹10,000 crore. This, coupled with the preference for good quality stocks, should hold the fund in good stead, should the market turn volatile. The scheme’s expense ratio of 2.2 per cent is in line with competition.

In the past year, the fund has added stocks in the automobile, cement and financials space. At the same time, it has reduced exposure to stocks in the pharma space that have been grappling with regulatory issues and those in the IT space, facing the heat of growing protectionism, globally.

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