Investors on the look out for an income-generating investment that can deliver returns higher than fixed deposits, can consider Birla Sun Life MIP II Wealth 25.

A monthly income plan, the Birla Wealth 25 fund usually invests around 75 per cent of its portfolio in debt instruments and the rest in equity.

Since its inception in 2004, the fund has paid out dividends every year. Investors can opt for a quarterly or monthly payout option based on their requirements. The scheme ranks in the top quartile of funds across time frames, beating the category average by a margin of 3 to 11 percentage points. Across interest rate cycles as well, the Birla Wealth 25 fund has held above the category’s average and ranks in the mid-to-top quartile range.

The Birla Wealth 25 fund follows a more aggressive strategy in both its debt and equity selections. The fund is benchmarked to the CRISIL MIP Blended Index.

Strategy In the one year period, the fund’s 31 per cent return puts it well above the category’s average of 19 per cent. This performance level was achieved by investing almost 30 per cent of its portfolio in equities from 2013.

The sharp rally in the equity markets helped. Alongside, in the last one year, yields on the 10-year G-Sec softened from 9 per cent to 7.7 per cent levels, leading to a strong rally in bond prices.

Besides a higher equity allocation, the fund has picked several stocks that gained multi-fold such as V-Mart Retail, Hitachi Home & Life Solutions and Eicher Motors. In its debt portfolio, the Birla Wealth 25 fund follows a short to medium-term strategy. Average maturity periods have usually been two-three years. But since early 2014, the fund has built up its holding in government securities to 42 per cent now. Average maturities moved up to four-five years and the fund gained as gilts rallied last August. With interest rate cycles peaking, a long-term strategy will also help now. Similarly, the fund relied on corporate debt between late 2012 and most of 2013, which were then offering higher interest rates as bank credit dried up. In the rising 2011 interest rate cycle too, the fund invested heavily in corporate debentures, which accounted for more than 60 per cent of the portfolio at times. The fund also includes lower-rated AA bonds, which offer better rates.

The fund’s recent portfolio gives an yield-to-maturity of 8.3 per cent, placing it on a par with peers such as HDFC MIP LTP and Canara Robeco MIP.

Related Topics