An Open Ended Equity Growth Fund

Fund Manager: Pankaj Tibrewal

Date of Allotment: November 2008

The scheme aims at capital appreciation by investing in diversified stocks in the small and mid caps space that it perceives to have potential into bluechips. This increases the risk when compared to any other diversified scheme.

Portfolio Analysis

As per the mandate, the fund can invest upto 100 per cent in equities with 65 to 95 per cent of the total assets comprising mid-cap stocks and a maximum of 15 per cent in small cap stocks. As per the fact-sheet of October 2009, the aggregate investment in mid-cap stocks was 72 per cent of the total assets while 12 per cent comprised stocks from the small cap space.

With over 50 stocks in its portfolio, the fund has highest exposure to Consumer Non-Durables followed by Banking and Cement stocks. Notably, the exposure to any single stock has been under 5 per cent. The top three sector holdings for the fund and the top 10 stock holding is under 30 per cent respectively.

It will be also be worth noting that the exposure to the cement space has remained high since July 2009. Most cement companies are already facing pricing pressures due to the expected increase in production capacities going forward. This coupled with increase in cost of fuel, transportation and other specific raw materials has already led to some visible pressure on the margins of the company. Though the bet on mid cap cement companies may benefit in terms of consolidation in the industry, the swap ratio may not be in favor of the target company which may further drag down returns from this space in the medium term.

Being a relatively new company, the timing of the inception of the fund has helped it to heavily outperform its benchmark. To put matters in perspective, the scheme generated returns of over 146 per cent since inception in November 2008 as against almost 80 per cent returns by its benchmark, CNX Mid-Cap Index. The small size of the fund of under Rs.150 crore also makes it easier to manage.

Nevertheless, it may be too early to comment on the performance of the fund with such a short track record. One may also do well to note that the outperformance delivered thus far may not be sustainable over the longer term.

Investment Strategy Analysis

Timing of the launch along with ample diversification amongst sectors as well as stocks resulted into above average performance of the fund. However, its limited  track record could weigh on an investment decision.

Risk Profile:

Standard Deviation: NA
Beta: NA
Sharpe Ratio: NA

Outlook :  Those looking for investments in small and mid-cap stocks could bet on a fund with a longer track record and not get carried away with just the near  term track record of the fund.

Caveats : Higher exposure to cement stocks, track record and high exposure to mid cap stocks.