The fund's strategy is to invest at least 70 per cent of its assets in stocks that have a trailing P/E less than that of the Sensex at the time of investment. With the balance 30 per cent, the fund manager has a free hand. According to Sethi, "Buying good companies at an attractive/low PE is not the only anchor. We use other qualitative and quantitative screens such as quality of management, capital efficiency exhibited by the company, earnings growth, free cash flow generated by the company, valuations and liquidity."

With around 60 stocks and the allocation to the top five amounting to around 21 per cent (1-year average), the portfolio is not too aggressive with individual bets though strong sector exposures have been a norm. For instance, allocation to Metals touching 29 per cent (May 2008) and a similar move in Financial Services (May 2009). Such bets could turn out to be risky if they fail to deliver the desired results.

The relatively small size of the fund helps. For instance, the 6 per cent allocation to Technology was increased to 23 per cent in just four months in 2009. Similarly, the 29 per cent allocation to Financial Services was brought down to around 10 per cent within three months.

Although current allocation to large caps is around half the portfolio, in the past it has gone to as low as 20 per cent (November 2009).

The fund's strategy requires patience and investors should not get disheartened by underperformance over the short-term. "If one looks thematically at 2011, consumer oriented companies with visible near term earnings growth but trailing PE ratio ahead of the Sensex have done quite well. This fund cannot invest more than 30 per cent of the fund in stocks that have a trailing PE ratio higher than the Sensex. This relatively disadvantaged the fund last year," says Sethi.

During the market run-ups of 2007 and 2009, the fund beat its category by an impressive margin of over 20 per cent. During the meltdown of 2008, the fund registered a fall close to its category. In 2011, the fund's fall was pretty much in line with that of the average. But if we look at the returns over a five-year period, it is among the top three in its category.