The objective of this fund is to discover undervalued companies. It figures in our multi-cap category. The fund has outperformed its peers in the last four years.

Strategy: A contrarian strategy entails a long waiting period for stock picks to pay off, but this fund has managed it well. The fund invests in companies that offer stock-picking opportunities due to their being in a special situation--turnarounds, undervalued assets or acquisition/restructuring/merger candidates. As per the fund manager, there are no hard limits on the market cap or sector and the allocations are purely an the outcome of bottom-up stock picking.

The fund's portfolio composition shows a consistent 50-60 per cent allocation to large-caps, with 25-40 per cent parked in mid-caps and the rest in small-caps in recent times. The steady large-cap exposure contains portfolio risk. The fund usually avoids high P/E stocks.

A management change in 2010 seems to have contributed to the fund's good run. After starting out as a nearly R2,000 crore fund, the fund saw a fall in asset base during 2008-09, having since stabilised. The fund is currently mid-sized at R837 crore.

Performance: The fund has outpaced its benchmark by nearly 20 per cent since January this year, with a one year return of 52.4 per cent. Three-year returns at 23.4 per cent place it a creditable 7 per cent ahead of the benchmark and 3 per cent ahead of its category. The re-rating of severely beaten-down industrial and cyclical stocks has obviously worked in the fund's favour in the recent rally. This has led to an improvement in ratings from 3 stars and below until 2010 to 4-5 stars in the last one year.

What we don't like: The 'special situations' mandate may work best in depressed markets. Stock-picking opportunities for such a fund may shrink as valuations head higher.

Why invest? Very few contrarian funds have managed to deliver good performance but this fund is an exception to safely bet on.