Emerging mutual fund schemes you must invest in
We list schemes which have recently acquired star fame after impressive performance in the past three years.
Under the apparent calm, the mutual fund industry went through a huge churn last year that saw the emergence of several new star funds. These new kids on the block not only impressed with their consistent returns but also gave the established names a run for their money.
We discuss five funds that shined bright last year. Our selection is based on changes in star ratings (from no rating to 4- or 5-star or from below 4 to 4- or 5-star) by Value Research.
ICICI PRUDENTIAL FOCUSED BLUE CHIP
It is a large-cap equity scheme which invests in 200 top stocks according to market capitalisation on the National Stock Exchange (NSE).
Launched in May 2008 when the equity market was starting to decline, the fund closed financial year ended 31 March 2009 with a 26.5 per cent loss as against 39 per cent fall in the Nifty and 42 per cent in the NSE 200 index.
In 2009-10, it gave a 90 per cent return compared to Nifty's 77 per cent. In 2010-11, it again did well by returning 19 per cent as against Nifty's 11 per cent rise. In 2011-12, another difficult year for equities when the Nifty shed 9 per cent, the fund limited its loss to 3 per cent.
"The emphasis is on finding the best stocks and holding them for long periods," says Manish Gunwani, senior fund manager, ICICI Prudential AMC.
The fund's resilience in 2011 and better-than-benchmark returns in 2009-10 and 2010-11 make it one of the better performers in the equity large-cap category.
RELIGARE MID- & SMALL-CAP
The scheme was launched in one of the worst possible times to invest-19 January 2008, when the stock market was at peak, only to weaken in the next 15 months, when the Sensex fell from 21,000 to 8,000.
The fund's disastrous beginning (NAV fell 46 per cent between April 2008 and March 2009) was followed by a 133 per cent return in 2009-10 as against 126 per cent rise in the benchmark CNX Midcap index. In 2010-11, the fund (12 per cent) beat its benchmark (4.35 per cent).
It outperformed in 2011-12 too by posting a gain of 6.5 per cent as against 4 per cent fall in the CNX Midcap index.
The fund has had 50 or more stocks in the past one year. Its favourites are private banks and consumer food companies, which comprised 16 per cent and 9 per cent of the portfolio, respectively, at the end of March 2012.
RELIGARE TAX PLAN
In its first year of existence since December 2006, it beat the bigger funds in the category-SBI Magnum Tax Gain, Reliance Tax Saver, HDFC Long Term Advantage and Franklin Tax Shield-by giving a 64 per cent return compared to 59 per cent rise in the benchmark BSE 100 index.
The following year (2008), when the market crashed, it was the 6th best performer in the tax-saving category with a 50 per cent fall in net asset value or NAV. The worst fund in its category saw its NAV fall 65-66 per cent. The BSE 100 index fell 55 per cent during the period.
After the 2008-09 fall, the fund began to recover losses and registered a 98 per cent rise in NAV in 2009-10, the 11th highest return that year in the category. It also beat the benchmark (88 per cent) by 10 percentage points.
This was followed by a rather subdued 2010-11, when it returned 11 per cent (16th best in its category) as against 9 per cent generated by the benchmark.
The next financial year (2011-12) was marked by volatile equity markets. The average return by tax-saving funds during the period was -5 per cent. Religare Tax Plan not only outperformed its benchmark (-8.65 per cent) but also the category average by limiting its NAV fall to 0.5 per cent.
The fund's strategy is to bet on growth-oriented mid-cap stocks.
"We keep the portfolio well-diversified and use the three-year lock-in to our advantage by being patient investors," says Vetri Subramaniam, chief investment officer, Religare Mutual Fund.
SBI MAGNUM EMERGING BUSINESS
The fund's impressive performance in the past three years stands out in the mid- and small-cap category.
In 2009-10, it gave a 153 per cent return compared to 96 per cent rise in the benchmark BSE 500. In 2010-11, the fund (it rose 13.65 per cent) again beat the benchmark (7.5 per cent) by a fair margin.
But the performance in 2011-12 deserves special mention. At a time when most equity funds were struggling, the fund's NAV rose 12.4 per cent. The BSE 500 index fell 9 per cent during the period.
Being a mid- and small-cap equity scheme, the fund's returns are relatively volatile. The fund has had a high turnover ratio (145-150 per cent) in the last one year.
R Srinivasan, fund manager, explains, "The high turnover ratio is on account of relatively small number of stocks (we restrict the number of stocks to 25) which necessitates a churn, and a high concentration of mid- and small-caps, which requires us to run a large-cap filler to manage liquidity on the overall portfolio."
MIRAE ASSETS OPPORTUNITIES
The fund, launched in April 2008, completed three years in 2011 and straight away received the highest grade (5-star) from Value Research. It has maintained its performance and rating in the last one year.
The large- and mid-cap fund shed 42 per cent value in the first year (May 2008-March 2009) but made a strong comeback the following year (April 2009-March 2010) with a 121 per cent return. Its benchmark, BSE 200, rose 93 per cent during the period.
It followed this up by another 15 per cent increase in NAV compared to 8 per cent rise in BSE 200 in 2010-11. In a more difficult 2011-12, the fund lost 2.3 per cent compared to 9 per cent fall in the BSE 200 index.
"A large part of the fund's portfolio is the core holding and only a small part comprises tactical allocation. In the core portfolio, we typically have a buy-and-hold strategy unless there is a change in assumption which demands that we move to a better opportunity," says Neelesh Surana, Head, Equity, Mirae Asset Global Investments.
TAKE YOUR PICK
While choosing any of the funds mentioned here, other than consistency of performance (a key parameter for rating funds by Value Research), investors must also check assets managed by the particular fund, the pedigree and the profitability of the fund house. These are some parameters that rating agencies may not take into account but can prove to be crucial in the long term.
We discuss five funds that shined bright last year. Our selection is based on changes in star ratings (from no rating to 4- or 5-star or from below 4 to 4- or 5-star) by Value Research.
ICICI PRUDENTIAL FOCUSED BLUE CHIP
It is a large-cap equity scheme which invests in 200 top stocks according to market capitalisation on the National Stock Exchange (NSE).
Launched in May 2008 when the equity market was starting to decline, the fund closed financial year ended 31 March 2009 with a 26.5 per cent loss as against 39 per cent fall in the Nifty and 42 per cent in the NSE 200 index.
In 2009-10, it gave a 90 per cent return compared to Nifty's 77 per cent. In 2010-11, it again did well by returning 19 per cent as against Nifty's 11 per cent rise. In 2011-12, another difficult year for equities when the Nifty shed 9 per cent, the fund limited its loss to 3 per cent.
"The emphasis is on finding the best stocks and holding them for long periods," says Manish Gunwani, senior fund manager, ICICI Prudential AMC.
The fund's resilience in 2011 and better-than-benchmark returns in 2009-10 and 2010-11 make it one of the better performers in the equity large-cap category.
RELIGARE MID- & SMALL-CAP
The scheme was launched in one of the worst possible times to invest-19 January 2008, when the stock market was at peak, only to weaken in the next 15 months, when the Sensex fell from 21,000 to 8,000.
The fund's disastrous beginning (NAV fell 46 per cent between April 2008 and March 2009) was followed by a 133 per cent return in 2009-10 as against 126 per cent rise in the benchmark CNX Midcap index. In 2010-11, the fund (12 per cent) beat its benchmark (4.35 per cent).
It outperformed in 2011-12 too by posting a gain of 6.5 per cent as against 4 per cent fall in the CNX Midcap index.
The fund has had 50 or more stocks in the past one year. Its favourites are private banks and consumer food companies, which comprised 16 per cent and 9 per cent of the portfolio, respectively, at the end of March 2012.
RELIGARE TAX PLAN
In its first year of existence since December 2006, it beat the bigger funds in the category-SBI Magnum Tax Gain, Reliance Tax Saver, HDFC Long Term Advantage and Franklin Tax Shield-by giving a 64 per cent return compared to 59 per cent rise in the benchmark BSE 100 index.
The following year (2008), when the market crashed, it was the 6th best performer in the tax-saving category with a 50 per cent fall in net asset value or NAV. The worst fund in its category saw its NAV fall 65-66 per cent. The BSE 100 index fell 55 per cent during the period.
After the 2008-09 fall, the fund began to recover losses and registered a 98 per cent rise in NAV in 2009-10, the 11th highest return that year in the category. It also beat the benchmark (88 per cent) by 10 percentage points.
This was followed by a rather subdued 2010-11, when it returned 11 per cent (16th best in its category) as against 9 per cent generated by the benchmark.
The next financial year (2011-12) was marked by volatile equity markets. The average return by tax-saving funds during the period was -5 per cent. Religare Tax Plan not only outperformed its benchmark (-8.65 per cent) but also the category average by limiting its NAV fall to 0.5 per cent.
The fund's strategy is to bet on growth-oriented mid-cap stocks.
"We keep the portfolio well-diversified and use the three-year lock-in to our advantage by being patient investors," says Vetri Subramaniam, chief investment officer, Religare Mutual Fund.
SBI MAGNUM EMERGING BUSINESS
The fund's impressive performance in the past three years stands out in the mid- and small-cap category.
In 2009-10, it gave a 153 per cent return compared to 96 per cent rise in the benchmark BSE 500. In 2010-11, the fund (it rose 13.65 per cent) again beat the benchmark (7.5 per cent) by a fair margin.
But the performance in 2011-12 deserves special mention. At a time when most equity funds were struggling, the fund's NAV rose 12.4 per cent. The BSE 500 index fell 9 per cent during the period.
Being a mid- and small-cap equity scheme, the fund's returns are relatively volatile. The fund has had a high turnover ratio (145-150 per cent) in the last one year.
R Srinivasan, fund manager, explains, "The high turnover ratio is on account of relatively small number of stocks (we restrict the number of stocks to 25) which necessitates a churn, and a high concentration of mid- and small-caps, which requires us to run a large-cap filler to manage liquidity on the overall portfolio."
MIRAE ASSETS OPPORTUNITIES
The fund, launched in April 2008, completed three years in 2011 and straight away received the highest grade (5-star) from Value Research. It has maintained its performance and rating in the last one year.
The large- and mid-cap fund shed 42 per cent value in the first year (May 2008-March 2009) but made a strong comeback the following year (April 2009-March 2010) with a 121 per cent return. Its benchmark, BSE 200, rose 93 per cent during the period.
It followed this up by another 15 per cent increase in NAV compared to 8 per cent rise in BSE 200 in 2010-11. In a more difficult 2011-12, the fund lost 2.3 per cent compared to 9 per cent fall in the BSE 200 index.
"A large part of the fund's portfolio is the core holding and only a small part comprises tactical allocation. In the core portfolio, we typically have a buy-and-hold strategy unless there is a change in assumption which demands that we move to a better opportunity," says Neelesh Surana, Head, Equity, Mirae Asset Global Investments.
TAKE YOUR PICK
While choosing any of the funds mentioned here, other than consistency of performance (a key parameter for rating funds by Value Research), investors must also check assets managed by the particular fund, the pedigree and the profitability of the fund house. These are some parameters that rating agencies may not take into account but can prove to be crucial in the long term.
TAKING NOTE The ETF way to buying gold  The investible potential of gold is a function of individual and industrial demand, inflation outlook, strength of the currency, geo-political stability and supply. Given that gold has always been viewed as having value and its role as a medium of exchange has seen it adopt the traits of a natural currency. Therefore, investment demand for gold rises during adverse economic conditions, such as the current debt problems in the European Union and the resultant volatility. Physical investment in gold has negatives for retail investors. Buying physical gold involves the risk of erroneous pricing and, occasionally, theft. Additionally, when selling, valuations, the process of transaction and delivery makes the whole process inconvenient. An alternative method is to invest in a gold exchange-traded fund (ETF). Gold ETFs trade the precious metal online through a medium of exchange. Normally, each unit of a gold ETF is worth approximately one gram of gold. The investor does not have to bother about the purity, the security or the liquidity of such an investment. Also, gold ETFs' online tradability and transactability is exactly like stocks, making buying and selling far more convenient. This idea, though relatively new in India, has caught on well elsewhere in the world. In India, too, with rising awareness, Gold ETFs are gaining ground. However, for you to invest and trade in gold through an ETF, it is mandatory to have a demat account. This necessity excludes a large segment of Indian investors from benefit of growth potential from investment in gold. To counter this, mutual funds have devised a mechanism-gold fund of funds (FoF)- to allow demat-free and systematic investment in gold ETFs. In simple terms, a gold FoF collects the corpus from regular investors and puts it in a gold ETF. The investors in the gold FoF are provided a commensurate value of units in the portfolio. This mechanism ensures that investors obtain a stake in gold without the necessity of having to operate a demat account. Given this facility, investors can plan a long term investment in gold relatively economically. SANDESH KIRKIRE CEO, Kotak Mutual Fund (This is a sponsored article) |
