Birla Sun Life Equity - SWITCH

The fund's inability to outperform its benchmark does not augur well.

Investors can consider switching their holdings in Birla Sun Life Equity to another fund from the same stable — Birla Sun Life Frontline Equity.

Despite its multi-cap approach, the former has marginally underperformed its benchmark BSE 200 over one-, three- and five-year periods.

It delivered 28.3 per cent and 7.3 per cent compounded annually over three- and five-year periods, trailing its benchmark by two percentage points and 0.5 percentage points, respectively.

It managed to hold on to its benchmark return in 2011.

While this performance may not be bad per se, its inability to return over and above its benchmark does not augur well, given that it is an actively managed fund. The fund's performance compared with some of the top peers also shows significant divergence.

It also trailed its category average by 4 percentage points over a three-year period.

Birla Sun Life Equity did better its benchmark in 2008 by moving 10-15 per cent of its assets in to cash. That said, it still fell 57 per cent that year, higher than its category average.


Investors who wish to stay invested in equities can instead switch to Birla Sun Life Frontline Equity, a large-cap fund with a superior track record. This fund is also benchmarked against the BSE 200 and has outperformed Birla Sun Life Equity despite lower exposure to mid and small-cap stocks.

While the fund is not among the top in its category, its risk adjusted return, as measured by the sharpe ratio (at 0.87), is far superior to the large-cap category average (0.78) over a three-year trailing period. True to its large-cap status, the fund contained declines well both in 2008 and 2011.


Birla Sun Life Equity declined by 6 per cent against the 5-percent fall in its benchmark in the last one year. This places it in the bottom 10 list in the multi-cap category. After performing well in the 2007 bull rally, the fund has struggled to cope with the market swings.

In the 2009 rally it returned as much as its benchmark, even as several multi-cap funds clocked triple-digit returns.

The fund's underperformance is attributable to its focus on sectors such as capital goods and power through 2010 and 2011, precisely the sectors that were most hit by the slowing investment cycle.

Its higher cash position in December 2011 portfolio too, could have dampened its short- term returns as it may have failed to fully participate in the ensuing rally.

Portfolio overview

The fund has a well diversified portfolio of 63 stocks.

The majority of the stocks in the portfolio accounted for less than 2 per cent of the assets. Such a diversified portfolio may have dampened performance.

Its current portfolio, though, appears to match with the market's preferred sectors such as banks, software and consumer non-durables.

Its exposure to petroleum and power, however, may be a challenge for the fund.

The fund, in the past year, gradually reduced its exposure to banks.

As a defensive bet it had increased its exposure to consumer-non durables in the past few months. This strategy, though, has not helped thus far in 2012.

The fund is managed by Mr Mahesh Patil.

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