We like this fund for its consistent conservative position, which has aided performance in volatile as well as the bear phase of the markets.

Strategy

This fund focuses on capital preservation and paying out income under the income option. The fund follows an unadventurous style, with a maximum 25 per cent equity allocation, tilted towards large-caps. The fund managers endeavour to generate consistent returns with lower volatility by following bottom-up approach and invest in sectors which look promising over the medium- to long-term and then in stocks that are available at reasonable valuations. The debt portfolio emphasises on investing in instruments that generate consistently superior yields at low risk levels with investments in G-Secs having never exceeded 25 per cent of the debt portfolio.

The equity allocation has never crossed 21 per cent since inception and is usually maintained at less than 15 per cent. At present, the fund is invested in petro sector, power generation, storage of energy, manufacturing of equipment related to energy development or in the companies involved in consulting and financing these businesses.

Performance

It did not perform well in its initial 5 years but its performance turned around in 2008. The fund has an impressive track record and has consistently outperformed the category. However, it has never posted outstanding returns. Unlike 2011, when this fund had performed marginally better than the category average, in 2012, it slipped below the category average. But in the long run, this fund is consistent with above-average performance and downside protection in years when the markets fare poorly. The fund managers make active cash calls, which results in phases when the cash allocation goes up to 15 per cent to benefit from the available opportunities in both equity and debt markets.

The large-cap exposure to equity has helped this fund do well when the markets rise and check the fall when the markets fall.

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