Launched in December 1999, Birla Sun Life MNC Fund has maintained its fund rank one position under the small- and mid-cap equity category of the CRISIL Mutual Fund Ranking for the past six quarters. The fund's average assets under management (AUM) stood at Rs 319 crore for the quarter ended September. Over the past year, the AUM has increased 28 per cent, compared to almost five per cent for the category as in September 2012. Since June 2009, the fund has been managed by Ajay Garg, senior fund manager at Birla Sun Life Mutual Fund.
The objective of the fund is to generate long-term capital appreciation by investing in multi-national corporations (MNCs). The fund intends to identify companies with long-term growth prospects through a research-based approach. Over 70 per cent (average) of the fund's portfolio was held in small- and mid-cap companies over the past three years. The rest is in large cap stocks.
The fund has outperformed its benchmark (CNX MNC Index) and its category across various time frames (1, 2, 3, 5 and 7 years).
In the three-year time frame, it has delivered annualised returns of 16.6 per cent, compared with 7.6 per cent of the benchmark and 9.4 per cent of the category (see chart). Investment of Rs 10,000 in the fund at inception would have grown to around Rs 70,000 (annualised return of 16.3 per cent) as on November 19, 2012.
A similar investment in the benchmark would have approximately grown to around Rs 32,000 (annualised return of 9.5 per cent).
A monthly systematic investment plan (SIP) of Rs 1,000 for a period of five years would grow to around Rs 1 lakh, delivering an annualised return of 20.8 per cent. A similar investment in the benchmark would have grown to Rs 84,000 (annualised return of 13.6 per cent).
The fund's performance in terms of risk-adjusted return relative to its category is one of the key factors propelling its performance to the number one position in the CRISIL Fund Rank.
The fund's Sharpe ratio (which measures the excess returns over the risk-free rate per unit of risk) is at 1.18, considerably higher than that of its category average of 0.42.
The fund is holding a relatively concentrated portfolio compared to the category, both at the sector and the stock levels, mainly because of the MNC theme that the fund follows. Over the past three years, top five sectors constituted 63 per cent of the portfolio, while the category had 34 per cent exposure to these sectors. In addition, the fund's top 10 stocks constituted 49 per cent of the portfolio vis-a-vis 40 per cent for the category.
The fund has a higher exposure of about 33.4 per cent to defensive sectors like consumer non-durables and pharmaceuticals compared to the category average of 19 per cent over this period. The representative indices for these sectors - CNX FMCG and CNX Pharma - gave a superior annualised return of 26.2 per cent and 17.5 per cent, respectively, against 3.7 per cent annualised return by S&P CNX Nifty till November 19, 2012.
At the stock level, the fund held 33 companies in its portfolio (average) over a three-year period, compared to 48 for the category. During this period, 25 out of the 33 stocks have been consistently present in the portfolio.