Investors looking for a fund with a long track record of outperformance and a strategy that combines value and momentum styles can buy the units of Aditya Birla SL Equity fund (ABSL Equity).

The scheme has been around for nearly 20 years and has delivered a robust 23.9 per cent annually since inception.

ABSL Equity takes a diffused exposure to individual stocks and does not hesitate to load up on cash and debt during volatile markets. It is a multi-cap fund, though a majority of the scheme’s holdings are in large-caps — usually quality index names.

Thus, the fund is suitable for investors with a moderate risk appetite and looking to save for a long term of seven to 10 years.

Over three- and five-year time-frames, the fund has outperformed its benchmark — BSE 200 TRI — but has lagged behind the index in the last one year.

Over the last five years, it has delivered compounded annual return of 24.1 per cent, which is higher than what peers such as Franklin India Equity, DSPBR Equity and HDFC Equity recorded.

Investors can buy the units of the fund through the SIP route to average costs and sail through market volatility.

Blended strategy

ABSL Equity maintains a portfolio that takes only modest levels of risk.

At any point in time, the fund has exposure to over 70 stocks, resulting in highly diffused holdings.

Usually, individual stocks, barring the top few, account for 2-4 per cent of the portfolio.

Also, when the markets turn volatile, the fund takes exposure to cash and debt to the extent of 5-11 per cent of the portfolio, thus ensuring that the NAV is not eroded significantly during corrections.

Banks and financial services companies have been the top sectors held by the fund across cycles.

Holding these segments hurt the fund’s performance in the last one year, though it has paid off over the long term. Key exposure in the segment is to the likes of HDFC Bank, Bajaj Finance, and IndusInd Bank.

Most of these companies have remained immune to the NPA mess in the banking segment. Consumer non-durables is another segment that figures prominently in the fund’s holdings over the years.

With software stocks available at low valuations, the fund increased stakes in the segment early last year and was, thus, able to gain from the rally in IT shares in the last one year.

Similar is the case with another beaten down sector — pharma.

Thus, ABSL Equity has been able to pick stocks with a blend of value and momentum strategies. The fund invests in large-caps to the tune of 65-70 per cent of the portfolio, with a significant mid-cap portion — usually 25-30 per cent.

While the fund can have underperformance over short periods, it has always delivered over a longer horizon of 5-10 years.

Given that the fund takes modest risks and has a record of delivering above-average returns, ABSL Equity would be suitable for a wide range of investors who can add it to the core portion of their portfolios.

Related Topics