Part I -  http://www.theipoguru.com/article.php?ID=1417

Reliance Natural Resources Fund

Launched in February 2008, the scheme’s corpus stands at Rs 4,002 crores. Its launch coincided with the Market crash commencement. The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to generate consistent returns by investing in debt and money market securities.

As on 31st Jan 2010, the scheme has 65% exposure to Indian equity markets while 25% is exposed to International Equity shares and this has increased in the recent months. It has significantly enhanced the scheme’s Risk Profile. While the theme of the scheme is interesting, the performance since inception, hardly inspires. Further, thematic schemes do have limitations in terms of diversification, but the risk reward ratio for this scheme appears to be extremely skewed given the low Sharpe Ratio which at times was negative.

If one takes a holistic view in terms of its exposure to domestic and international equity, there is very high exposure to Petroleum and Energy segments, followed by Metals. These industries being cyclical in nature, the stocks herein maybe prone to volatility.

Clearly a non-performer, it maybe best to avoid taking exposure here. For those who are invested, cutting losses maybe a prudent strategy.