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Is the market volatility worrying you? Here’s one fund which not only weathers volatility better than its benchmark but can also deliver healthy returns during up cycles.
If you have a three- to five-year investment horizon and can take moderate risk, you can consider parking a portion of your surplus in Birla Sunlife Long Term Advantage Fund.
The scheme’s returns have been higher than its benchmark, the BSE 200, by about 6 percentage points across one, three and five-year periods.
The fund scores high on consistency; over the last five years, the fund’s annual returns have beaten the benchmark almost 88 per cent of the time.
Besides delivering benchmark-beating returns during market rallies, the fund, in the past has contained downsides during bear phases well. For instance, during the January-August 2013 period, while the BSE 200 Index lost over 15 per cent, the slide in the fund’s NAV was arrested at 13.7 per cent.
Increasing exposure to defensive themes, such as FMCG, IT and pharma helped.
Performance in the past year was aided by the fund’s adept moves to pare exposure to themes, such as construction, infrastructure, industrials and metals. Well-timed decisions to exit select out-of-flavour stocks also aided performance.
For instance, the fund sold off its holding in power transmission company Jyoti Structures in October 2014.
The stock price got decimated from ₹40 levels then to ₹14 now. Similarly, the fund’s decision to exit IVRCL during the same period also helped avert the steep erosion in its NAV. IVRCL’s stock price has been hammered from ₹18 levels in September 2014 to around ₹10 levels now.
Smart moves
The fund’s call to sell off Reliance Infrastructure was again proved right. The stock price has halved from the time the fund liquidated its holding in September 2014.
Besides exiting underperformers at the right time, the fund’s picks in the mid- and small-caps space also spiced up returns.
For instance, consider the stock of mid-sized oncology major Natco Pharma; its price has almost trebled in the past year, driven by optimism about its US business. Other ideas in the mid-cap space that provided a leg-up to the scheme’s returns include Sterling Resorts, Orient Cements and J Kumar Infraprojects.
In the last six months, the fund has increased exposure to stocks in the oil and gas, cement and chemicals space.
As of July, it had invested about 30 per cent of its assets in stocks in the financials space, to play the upside from economic recovery. The fund held nearly 62 stocks in its portfolio as of July.
It normally invests a little over a third of its assets in mid-cap stocks.
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