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Investors looking at a value investing strategy can consider taking small exposure to units of Birla Sun Life Value Fund. A three-year compounded annual return of 25 per cent places the fund in the top-ten list of diversified equity category over the above period.
That the fund was launched in March 2008, soon after the early round of market corrections, made it easier for the fund to pick stocks at low valuations, true to its mandate. What inspires confidence is the fund's call of sticking to value stocks, even if it means near-term underperformance, as is the case now. It is not often that mutual fund portfolios are laden with stocks that are not market favourites, despite their relatively lower valuations.
Suitability : Investors would typically need a 3-5 year horizon in a value fund as such funds may undergo short phases of underperformance.
An SIP strategy would work well, especially when the fund goes through the ‘lagging' phase before the value picks deliver. It is also noteworthy that Birla Pure Value may not be as aggressive as funds such as UTI Master Value when it comes to performing in rallying markets.
Performance : Over a three-year period, the fund beat its benchmark BSE-200 by a convincing 14 percentage points and also overtook peers such as UTI Master Value and others such as Templeton India Growth and HDFC Growth, that sport a value portfolio. Over a one-year period, though, the fund declined by 0.5 per cent, short of its benchmark's 1.4 per cent return.
This underperformance can be attributed to the fund holding underperforming stocks in the capital goods and infrastructure space — JMC Projects, Jyoti Structure and GE Shipping to name a few. Peers who stayed away from such sectors fared marginally better and delivered positive returns of 1-5 per cent over a one-year period.
That the fund has been more consistent in its performance is visible in its one-year rolling return; wherein it beat its benchmark a good 90 per cent of the time.
Portfolio : Despite its mid- and small-cap bias, Birla Sun Life Pure Value, thanks to its value approach, did better over the last year than another mid-cap fund from the same stable, Birla Midcap. The fund, by and large, stuck to its exposure to financials, even as a few funds pruned holdings in this sector in the recent correction. Fertiliser and chemical stocks too hold high weights.
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