Mutual Funds

DSPBR Equity Opportunities Fund: Steady performer with low risks

K Venkatasubramanian | Updated on June 13, 2018 Published on June 10, 2018

The fund has managed to regularly beat its benchmark with a diffused portfolio

Investors looking for a steady-performing fund with low risks can buy the units of DSPBR Equity Opportunities (DSPBR Opportunities earlier). The new avatar will have no change in mandate as the fund will continue to remain a multi-cap scheme.

Consistent

Over longer time-frames of three, five and 10 years, DSP BlackRock Equity Opportunities has consistently beaten its benchmark — NSE 500 — by 2-5 percentage points.

A highly diffused portfolio with very little concentration towards individual stocks considerably lowers the fund’s risk profile.

A predominantly large-cap focus, with modest exposure to mid-tier stocks to pep up returns has worked in DSPBR Equity Opportunities’ favour across market cycles. The scheme manages to contain downsides during corrections, while participating reasonably during rallies. It also takes cash calls to ensure the NAV is not hurt during intensely volatile periods.

It can be a suitable addition to the portfolio of an investor with a moderate risk appetite looking for steady market-beating returns over the long term. The SIP route may also be considered for buying units of the fund to average costs and ride out volatility.

Portfolio

Earlier, the scheme used to have more than 50 stocks in its portfolio. Over the past year or so, it has had more than 70 stocks among its holdings. This diffused exposure across stocks significantly reduces risk levels.

Barring banks, where DSPBR Opportunities has always had more than 20 per cent exposure, all other sectors account for less than 7 per cent of the portfolio. The fund’s higher exposure to banks and financial services companies has dragged its returns over the last one year. However, it has increased exposure to sectors such as software — a space where there has been a significant re-rating of stocks — and construction projects — a segment that is likely to deliver well as the economy goes into a high growth mode. The fund has reduced exposure to petroleum products as crude prices increase.

It also moves to debt and cash to the extent of 5-7 per cent of the portfolio during volatile periods, which helps protect downside.

In the past 10 years, the fund has managed to deliver a healthy 13.3 per cent returns annually, placing it in the top quartile of the funds in its category, ahead of peers such as Kotak Opportunities.

DSPBR Opportunities invests over 80 per cent of its portfolio in large-caps, with mid-caps making up 10-15 per cent. This mix allows the fund to deliver steady, rather than spectacular, returns.

Investors looking for consistent market-beating returns with reasonable downside protection can buy the units of the fund. A time horizon of 5-7 years is necessary for delivering meaningful outperformance vis-à-vis its benchmark as well as category.

Published on June 10, 2018

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