Calculated Risk

Its aggression has definitely worked to its advantage. With 25 per cent of its assets committed to equity and managed by one of the most experienced and competent equity fund managers, it stands tall managing close to 35 per cent of the assets of the category.

Jain is willing to trade short-term gains in his conviction to stick to his equity allocation. Even under turbulent market conditions, he refuses to flee to cash or debt. So at certain times, the fund pays the price in terms of returns, but when the equity market does an about turn, it stands vindicated. In 2008, it was a bottom quartile performer. Come 2009 and it was a category topper. Simply because in the first quarter, its average equity allocation was 24 per cent, putting it in a perfect position to ride the rally that followed. Similarly, in 2011 it paid the price but its current year-to-date returns put it way ahead of the category average.

Having a huge asset base, one should not be surprised to expect a very well diversified portfolio. In 2010, the fund held on an average 72 stocks in its portfolio (in the recent past, the fund has not been disclosing its entire portfolio). Worth noting is that Jain refrains from actively churning his stocks and prefers to adhere to a buy-and-hold strategy. Aggression is seen on the debt front and it’s not unusual to see longer maturity calls as compared to its peers. Recently, the fund increased the average maturity profile of its portfolio to 4.51 years (category average: 2.10 years). However, no compromises are done on the quality front.

Similar to its equity portfolio, a diversified debt portfolio is maintained with allocation to a single instrument not exceeding 10 per cent.

Though expenses are not high, they are not much lower than the category average either, this despite a huge asset base. All in all, an aggressive fund with ups and downs but rewards investors who stay on.