Axis Equity Fund and Axis Long Term Equity Fund: The past 2 years have been tough for equity fund management at the fund house. Poor performances and an exodus of fund managers (Pankaj Murarka, former head-equities, quit in July 2016 and another senior fund manager Sudhanshu Asthana quit thereafter) do not bode well.
Returns of Axis Equity Fund (AEF) have been disappointing and Axis Long Term Equity Fund (ALTE), too, had a bumpy ride in 2016. Given the uncertainty in the fund management team, we have decided to drop both the funds from Mint50.
AEF, a large-cap oriented equity fund, lost a little over 1% and a little under 4% in 2015 and 2016, respectively. In both these years, it finished in the bottom quintiles when compared to peers.
The scheme’s management has been aggressive on a few counts. For instance, it first invested, then exited, then re-entered some large companies such as State Bank of India and Bank of Baroda. “One lesson we have learnt is that if we hold on to companies—and the reasons why we bought them—for long, the chances of such holdings working in our favour increase. We bought shares to some of the larger names at the right time perhaps, but we may not have held them long enough,” said a senior fund official who did not wish to be named.
Shreyash Devalkar joined Axis Asset Management last year and now manages AEF . Jinesh Gopani heads the fund house’s equity funds.
To reduce the scheme’s volatility, the fund house has reduced AEF’s exposure to mid- and small-cap stocks. “Our strategy now is to have 75-80% of AEF’s corpus in large-cap companies and up to about 20% in mid- and small-sized companies,” said the fund official.
We suggest that you stop systematic investment plans (SIPs) in these and exit once they complete the exit load (for AEF) and lock-in period (for ALTF).
IDFC Premier Equity Fund (IPE): In 2014 and 2016, IPE stood in the bottom quintiles of mid-cap schemes. On a rolling return basis as well (a series of 3-year returns), IPE has been slipping.
Kenneth Andrade (who had been managing this scheme since 2005) and his co-fund manager since IPE’s inception (Punam Sharma) have quit the fund house. Anoop Bhaskar, who heads the fund house’s equity funds, now overlooks the scheme.
Bhaskar aims to bring down IPE’s share in the fund house’s assets under management. Its corpus was 68% of the fund house’s equity mutual funds by the end of 2015, even though the fund house had 11 such schemes at the time. “I prefer to run the schemes keeping a benchmark index in mind. While I don’t hug the index, we shouldn’t veer so far from it that we take very active sector and company calls,” said Bhaskar. He said IPE will try to hold 35-40% in large caps and the rest in small- and mid-sized companies.
Tata Balanced Fund (TBF): We had included TBF in Mint50 in September 2014 because it was backed by performance and a strong team. The fund house had brought in a new chief executive officer (Arvind Sethi) and a new chief investment officer (Ritesh Jain). In those days, TBF was managed by Atul Bhole. Last year, Bhole and Jain left the fund house; Sethi had already left in 2015.
TBF’s performance suffered in 2016. When the balanced funds category returned about 6% and the top five balanced funds returned 12% on average, TBF returned just 4%. Pradeep Gokhale, a senior fund manager at the fund house, now manages the scheme. He has increased TBF’s allocation to large-cap scrips. A high allocation to the pharma and low allocation to metals, energy and oil and gas were among the factors that hurt TBF in 2016.
Lack of aggression on the debt portion also had side effects. The scheme kept its duration low, despite a falling interest rate scenario.
“We run this portfolio more on the lines of our short-term bond funds. Typically, the yield from the debt side of TBF should be around 7% at all times. We don’t take too much risk on the debt side. While we don’t see a spike in yields, we don’t see yields coming down much either,” said Gokhale.
SBI Emerging Business Fund (SEB): In the past 3 and 5 years, SEB returned close to 20%.
But, as it is in the mid-cap funds category, the returns pale in comparison to its peers. SEB is a multi-cap fund but has had a tilt towards mid-cap scrips in the past 3 years, and thus gets classified as a mid-cap fund.
Other funds in the category have done better, as they invested their entire portfolios in mid-cap scrips.
So, if the fund and its fund manager R. Srinivasan have done reasonably well, why remove it from Mint50?
The scheme is unique: it doesn’t follow the benchmark index when picking stocks. It’s normal for actively managed funds to do this.
However, a fund that is palpably agnostic to the benchmark index, as SEB is, may not be the right choice for the common investor, especially when the market regulator mandates that each fund has to have a benchmark index.