BackMint50: What’s out
These are the 5 schemes that are exiting our list
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PINEBRIDGE INDIA SHORT-TERM FUND
This one goes out purely because we feel there are better alternatives. We do not have a problem with its strategy. Since the end of December 2013, PineBridge India Short-Term Fund (PISF) has increased its average maturity to about one year and nine months through 2014, up from about one year and seven months in 2013.
It manages its average maturity dynamically. There have been times, during rising interest rates, that the scheme brought down its average maturity considerably; in March 2010, its average maturity dropped to just about four months. “Over the past month, I have increased the average maturity as we are very bullish on government bonds," said Vikrant Mehta, fund manager and the MF’s head of fixed income. He manages his exposure to G-secs very opportunistically. In December 2012 and September 2013, the G-secs exposure had shot up to 15% and 24%, respectively. In other months, it has come to zero.
A good thing about PISF is its low expense ratio. The scheme doesn’t have an exit load; this could be a bother if a single or few large investors exit. Besides, the fund has consistently been rated two stars as per Value Research.
SBI SHORT-TERM DEBT FUND
Except for a stellar run in 2012, the scheme’s performance has been decent, but not the best. The scheme primarily goes out to give way to better options in this space. The scheme has consistently increased its average maturity in the past one year. “We have had a positive view on interest rates and we feel that rates, particularly at the shorter end of the yield curve, would come down. However, we have are strict about not going beyond three years as far as our fund’s maturity is concerned," said Navneet Munot, chief investment officer, SBI Funds Management Pvt. Ltd. Although it splits its investments between instruments that mature before a year and those that mature after a year, the scheme has increased its allocation to the latter variety this year. It has been investing in good quality scrips and doesn’t take too much credit risk. Existing investors can continue with the fund.
BIRLA MONTHLY INCOME PLAN (BMIP)
BMIP is a conservatively managed MIP whose equity exposure doesn’t exceed 20% of its corpus. On the debt side, its fund manager tries to keep maximum exposure through high-yield short-term securities. Occasionally, the fund invests in low-rated securities but only after research and adequate checks on security against loans are done. It dabbles in G-secs sometimes, but relies on accrual income for returns. The equity part is built similar to the portfolio of the fund house’s Frontline Equity Fund (also a part of our recommended list). According to Mahesh Patil, co-chief investment officer, Birla Sun Life Asset Management Co. Ltd, “The equity portion of the fund is managed with a large-cap bias with an emphasis on stock selection rather than on sector deviations. This strategy is likely to deliver consistent outperformance across market cycles, but in an extreme bull market, it might underperform other MIPs that have a higher exposure to mid-caps. In the debt portion, our endeavour is to give stable returns through accrual without too much volatility." The fund’s performance has been uninspiring. We feel that Birla MIP II Savings 5, is a better option .
TEMPLETON INDIA GROWTH FUND
Fewer portfolios in the MF industry have been as consistent as that of Templeton India Growth Fund (TIGF). The scheme’s portfolio turnover ratio is among the lowest in equity funds at just under 7%. A turnover of 100% means that the entire portfolio has been changed at least once in the past one year. The scheme’s performance has been subdued for quite some time. Despite following the value style philosophy, it’s performance in falling or volatile markets has been poor. On a rolling return basis (three-year returns taken at the end of every quarter), it has consistently featured in the bottom two quintiles.
Another speciality in this fund—apart from low churn—has been the conviction with which Sehgal and the fund’s primary fund manager, Mark Mobius, hold stocks. The scheme has consistently held about 12% in Tata Chemicals Ltd this year and about 11% in Bajaj Holdings Ltd. In the past, it held ING Vysya Bank Ltd to the tune of 14.5%.
UTI DIVIDEND YIELD FUND
Insipid performance in the past two years and growing equity markets where you can afford to buy into slightly aggressive strategies; we think it’s time that UTI Dividend Yield Fund (UDYF) moves out. Last year, its holdings in government-owned banks and capital goods sectors hurt its performance. Some of that got reversed as this segment shot up in the current market rise.
According to Swati Kulkarni, fund manager, UTI Asset Management Co. Ltd, “The fund’s large-cap orientation makes relative performance look lower when you consider the peer group. The performance against the benchmark has improved this year thanks to the banking pack, select stocks in IT (information technology) and energy sectors. We are not changing the portfolio too much, but have become overweight in the industrial manufacturing segment." She sounds confident of her portfolio and says the stock picks are good from a 3-5-year perspective.
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