4 equity funds from Birla Sun Life Mutual Fund

By Morningstar Analysts |  23-03-17 | 
 

Senior fund analyst Kavitha Krishnan looked at four equity funds from Birla Sun Life AMC and assigned each an analyst rating. The funds are from the three equity categories and each has a different fund manager.

Gold, Silver and Bronze indicate that our analysts think highly of a fund; the difference between them corresponds to differences in the level of analyst conviction in a fund’s ability to outperform its benchmark and peers through time, within the context of the level of risk taken over the long term. Neutral represents funds in which our analysts don’t have a strong positive or negative conviction over the long term.

(Long term is defined as a full market cycle or at least five years).

Birla Sun Life Frontline Equity: SILVER

  • Star Rating: 5 stars
  • Date of Analysis: December 2016
  • Category: Large Cap
  • Investment Style: Large Growth
  • Fund Manager: Mahesh Patil

Over the past 10 years, this fund has never underperformed the category average. Its 5- and 10-year returns are an impressive 18% and 14.71% annualized, respectively.

The fund manager tends not to have a very large sectoral deviation from the benchmark: Targeted sector exposure within +/- 25% or absolute +/- 3% of the sectoral weight in the benchmark (whichever is higher).

While he does take the macro outlook into account, there is no denying that his alpha generation comes from stock selection. Although he looks at valuations closely, he is willing to be flexible if he is convinced of the growth prospects. His investments in stocks like Cholamandalam Finance and Kotak Mahindra Bank typify this approach.

He also employs short-term tactical plays and is not averse to increasing and reducing his allocation to the same stocks routinely based on price momentum and valuations.

You can read the analyst note here.

Birla Sun Life Equity: BRONZE

  • Star Rating: 4 stars
  • Date of Analysis: December 2016
  • Category: Flexi Cap
  • Investment Style: Large Growth
  • Fund Manager: Anil Shah

The fund manager’s strategy entails moving across market caps based on the stock’s valuation and growth prospects. Hence, the fund’s allocation to small and mid caps can vary over time.

Since 2014, the fund manager has been increasing his allocation to small and mid-caps and continued to hold a higher level of exposure in 2016. This resulted in an amazing performance last year. Though the fund manager tends to invest about 30%-40% of the portfolio in small and mid-cap names, the February portfolio points to a 23% exposure to mid and small caps.

Anil Shah took over the managing of this fund in October 2012 and has done a good job. However, our analyst would like to monitor the fund over the long haul and hence has assigned a Bronze for now.

You can read the analyst note here.

Birla Sun Life Mid Cap: BRONZE

  • Star Rating: 3 stars
  • Date of Analysis: December 2016
  • Category: Small / Mid Cap
  • Investment Style: Mid Blend
  • Fund Manager: Jayesh Gandhi

The fund impressed in 2009, post which it consistently underperformed the category average for 5 consecutive years. This performance has resulted in the fund getting a Bronze.

Having said that, it is worth pointing out that Jayesh Gandhi took over the helm in January 2015 and the fund since then has shown an improvement in performance. However, our analyst would like to monitor the fund over a longer tenure before upgrading it.

The portfolio is well diversified with around 70 stocks. Individual stock weights rarely exceed 3% of assets and the exposure to large caps in the February portfolio was 37%.

You can read the analyst note here.

Birla Sun Life Dividend Yield Plus: NEUTRAL

  • Star Rating: 3 stars
  • Date of Analysis: December 2016
  • Category: Flexi Cap
  • Investment Style: Large Blend
  • Fund Manager: Satyabrata Mohanty

The fund manager does not have a preference for market cap or style while constructing the portfolio. The February portfolio reveals a 50% allocation to large caps and the rest to smaller fare.

The fund’s mandate allows investments up to 35% in non-high-dividend names. The fund manager uses this leeway to make tactical bets and look at special situations and merger stories. The portfolio’s dividend yield has been maintained at the requisite levels.

The past 5 years have not been great for the fund. Though it outperformed the category average in 2014 by 2%, it underperformed over the other four years. The fund has also been characterized by multiple fund manager changes. Besides instability at the helm, the process has been tweaked more than once to make the criteria for picking stocks more liberal. Our analyst believes the fund should get a Neutral rating.

You can read the analyst note here.

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