Birla Sun Life Frontline Equity: One for the long haul

Looking for a fund that ticks all the checkboxes? Birla Sun Life Frontline Equity is a fine choice. It’s a consistent benchmark beater, participates in upsides, contains downsides well, is among the best in its category, and plays it relatively safe.

The fund invests mostly in large-caps (more than 80 per cent of the portfolio across market cycles for the past few years). It may not be a chartbuster in raging bull markets like some of its peers that have higher exposure to smaller stocks.

But decent participation during rallies, coupled with the ability to contain losses when the tide turns, has made the fund a top performer over long time periods.

The fund’s annualised return over the past five years is over 12 per cent, better than most peers’ in the large-cap category. It has beaten its benchmark BSE 200 convincingly across time periods, with outperformance in excess of 5 percentage points over three and five years.

The fund’s winning consistency is remarkable. On a one-year daily rolling return basis, it has beaten the benchmark almost always, whether in rallies or downturns, over the past five years. Among large-cap funds, Birla Sun Life Frontline Equity is one of the top performers and ranks in the top quartile over long time periods. A large corpus (about ₹10,700 crore currently) has helped it keep its expense ratio lower than the category average. This has also been aided by the fund’s buy and hold investing strategy which translates into a low portfolio turnover ratio.

Besides large-cap focus, the fund’s risk is also reduced by a large portfolio of more than 70 stocks. The big bets exceeding 5 per cent of the corpus are in blue-chips, such as Infosys and HDFC Bank. Also, the fund’s limited holding of smaller stocks sports sound names, such as Jagran Prakashan and IDFC.

Birla Sun Life Frontline Equity holds stocks across multiple sectors, with adept rotation holding it in good stead. For instance, the fund was quick to increase exposure to cyclicals, such as banks and autos when the market rally began in August 2013. Over the last year, an iffy market has seen allocation shift in favour of refiners and defensives, such as pharma and software. Deft stock selection and juggling, too, have helped the fund. Over the last year, it increased stake sharply in Infosys, which was on the comeback trail, and HPCL that benefited from the oil price rout. Paring of stake in ICICI Bank and Axis Bank helped too.

Over the long term, stocks such as Sun Pharma and Bosch held for over five years have more than tripled.

While the fund targets being fully invested in equity, exposure has been in the range of 90-99 per cent over the past few years. Currently, the allocation is at the lower end, suggesting caution. The chunk of the balance corpus is parked in Birla Sun Life Cash Plus, a liquid fund that’s also among the better performers in its category.

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