Launched in 1995, Reliance Vision is a veteran of sorts, so to speak. The fund has witnessed the euphoria of the tech boom and its fall from grace, and numerous up and down markets including the global financial crisis of 2008. In its heyday, it was a head turner with calendar year returns of 74.58% (2002) and 154.87% (2003).
That was achieved by investing heavily in mid-cap stocks, rapid churning of the portfolio and then plunging into large caps when they made a comeback. The fund had an acute focus on spotting companies that offered good value and when the opportunity did not present itself, the fund manager bided his time with substantial cash calls (no longer the case).
The fund disappointed in 2004 with a return of 19.81% but bounced back in 2005 with 53.47%.
Unfortunately, those days of glamour have been left behind. As the fund’s assets swelled, performance stabilised. On a year-on-year basis, the fund has marginally underperformed over the past decade, consistently falling in the third/fourth quartile since 2007 (except in 2008 and 2014). A look at the 3-, 5-, 10-year returns also disappoints, relative to the category average.
So it might surprise our reader to note that senior fund analyst Kavitha Krishnan has assigned a Bronze rating to this fund. A Bronze-rated fund has advantages that outweigh disadvantages and has sufficient analyst conviction to warrant a positive rating (as against a Neutral or Negative).
Kavitha believes that the fund’s intrinsic strength lies in a competent fund manager and a strong process.
Ashwani Kumar plies a growth-at-a-reasonable-price strategy. He typically scouts for companies with strong and sustainable business models. He will be flexible with valuations and pay what he thinks is a fair price, given the company’s growth prospects. He tends to take a 2- to 3-year view on stocks and focuses on factors such as ROE and ROCE when evaluating companies.
The research-orientation and qualitative overlay seeks to identify companies with strong management teams, robust business models, superior technology, brand equity, favourable cost and sustainable competitive advantages. In other words, he looks for companies which have a sustainable edge vis-à-vis the competition.
So though the manager runs a concentrated portfolio (around 33 stocks with the top 10 cornering 65% of the portfolio), he mitigates the concentration risks by ensuring that he buys quality.
On a closing note, Kavitha is of the opinion that this fund is capable of delivering a far superior showing. As demonstrated in recent years, his strategy won’t always work, but we believe it will come to the fore in a more broad-based market rally. This fund remains a viable proposition for patient investors who can digest volatility and are comfortable with a sector heavy portfolio where a major portion of the assets under management are invested in three to four meaningful sectors.
You can read the brief analyst note here.
