Aditya Birla Sun Life Top 100: Makes the most of market opportunities

The fund’s ability to sense the turning tide and redeploy funds has kept it on top

The conservative approach followed by Aditya Birla Sun Life (ABSL) Top 100 will stand investors in good stead in the current circumstances when markets are perched at a peak.

The fund is the best performer among peers such as ICICI Pru Top 100, DSPBR Top 100, UTI Top 100 and IDBI Top 100, sporting a compounded annual return of 19.5 per cent over a five-year period.

Going by one-year rolling returns, the fund has bettered the benchmark 82 per cent of the time in the last five years. This is a higher level of outperformance than for most peers. The fund trounces peers on other parameters such as Sharpe ratio (risk adjusted returns) and expense ratio.

Strategy

Be it in equity exposure, choice of market-cap or sector preferences, ABSL Top 100 plays it safe. Benchmarked to the Nifty 50, the fund’s mid-cap exposure does not exceed 10-12 per cent even in secular bull runs.

It cuts this further during choppy phases of the market or when valuations in this segment seem overheated, as it is today. It takes cash and debt calls when conditions require caution.

At the same time, its ability to sense the tide turning and redeploy funds is what has kept it on top. For instance, fresh out of the bear markets of 2011, the fund held only about 88 per cent in equity in the beginning of 2012.

But equity holdings zoomed to 96 per cent in the next month and stayed predominantly over 95 per cent during the rally that year. Ditto, with the rally that began in September 2013.

While choosing defensives such as FMCG or pharma during tricky market conditions, BSL Top 100 also rides on the right sectors to give a leg-up to returns during bull phases. Latching on to cyclicals in the 2014 upswing is a good example.

Stock choices

Considering that the market has been on a bull run, the fund has cut down its equity exposures to 88-91 per cent in recent times to cushion volatilities and falls. Its cautious approach is also visible in its sector choices.

From about 6.6 per cent in the beginning of 2017, the fund has steadily upped stakes in FMCG to about 10 per cent now.

Dabur, which will benefit both from the strengthening rural demand as well as the preference for Ayurvedic products among consumers, has been added to the portfolio in this period.

The fund has upped stakes in ITC too, making it one of the top holdings.

It now has a 5.5 per cent exposure to this stock.

Interestingly, with valuations ruling quite high for the FMCG segment, both Dabur and ITC are among the relatively low PE stocks in the space.

The recent addition of Hero MotoCorp to the portfolio also brings out the fund’s bet on improving rural consumption. Banks remain the top sector choice for the fund.

Even as Tech Mahindra has been added recently, the software space has not found much favour, given the headwinds from the key US market.

To take advantage of the rally in commodities, stakes in the metals segment have moved up in the last few months.

Mid-cap holdings now constitute only about 5 per cent of the portfolio.

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