Video Center


A unique fund with a contrarian bent

The portfolio of Reliance Vision has qualitative bent with a focus on a few meaningful sectors. Senior analyst Kavitha Krishnan looks at this unique portfolio and discusses the strategy in detail.

Chintan Mehta: Hello, everyone. Welcome to Morningstar. I'm Chintan Mehta, Senior Investment Analyst. Joining us today is Kavitha Krishnan, Senior Fund Analyst, to talk about Reliance Vision Fund.

Hi, Kavitha. Thanks for joining us.

Kavitha Krishnan: Thank you for having me here, Chintan.

Mehta: This is a large cap fund with a contrarian tilt in the way it is run. Could you tell us how this fund stands out from the other?

Krishnan: Sure, Chintan. This fund is run by Ashwani Kumar who we think is a competent manager within the large cap space. He has been running this fund since 2003 and that's how long he has been with the fund house as well. In addition to running the fund he also runs the capital goods, autos and the metal sectors along with dedicated analysts within the fund house.

While we view his hands-on approach as a positive, we are wary of the key man risk that comes with it. Ashwani plies a growth-oriented approach a keen eye on valuations. The qualitative overlay that he gives to the portfolio and the contrarian bent gives the fund a very unique flavor. Having said that, this contrarian approach does not always seem to pay off. It does not always reflect in terms of a positive performance as has been the case in some of the recent years.

Mehta: You talk about fund running Ashwani's high conviction bets. So, how does he include this as a part of his portfolio?

Krishnan: Ashwani typically looks at investing in stocks which stand out in terms of their core competency. While he has a keen eye on valuations, Ashwani can tend to pay what he thinks is a fair price for a stock. Let's take the example of consumption stocks. While he shied away from investing in consumption stocks in 2010 based on the high valuations, he bought into some of these names in 2014 given his outlook on the positive growth and the upside that he could get out of these stocks.

Ashwani tends to take a two to three-year view on the stocks that he invests in and looks at factors like ROE and ROCE while investing. The manager typically aims to invest in businesses which will give him a first mover advantage and this again gives it a little bit of a contrarian tilt. Large cap stocks typically account for about 80% of the portfolio with top 10 holdings accounting for about 65% of the total AUM. However, this can fluctuate based on Ashwani's convictions.

The portfolio typically tends to remain invested in three to four meaningful sectors and this is how it has been run on a historical basis. Ashwani churned the portfolio at a sector level in 2013-2014 moving away from sectors like healthcare and moving into sectors like autos and industrials given that he had a positive view on the risk/reward ratio within these sectors. Overall, this is how the fund is positioned.

Mehta: Despite being one of the oldest funds in the industry, the performance of the fund has remained volatile. So, could you take us through the reasons for this?

Krishnan: You're right, Chintan. The performance indeed has remained volatile. Between 2009 and 2014 the fund has witnessed some underperformance as compared to the peers. While it did slightly better in 2014, it didn't do as well as it could have in the sideways market of 2015. Given that the fund takes a lot of contrarian bets and this is quite unique in terms of how it compares with the benchmark, this could lead to some underperformance on the fund relative to the benchmark.

Despite being underweight in the banking sector, this sector did lead to some underperformance on the fund in 2015 led by stocks like ICICI and SBI which led to some underperformance on the fund. The fund also carries an overweight to the industrials sector; however, stocks like BHEL and L&T Limited have contributed to the overall underperformance too.

Mehta: Given the unique strategy that the fund manager follows, how does investors should view this from their perspective?

Krishnan: Given the flexible investment approach that this strategy follows, this fund falls in the flex cap category within the Morningstar categorization buckets and can form a supporting role in an investor's portfolio.

Mehta: Thank you Kavitha for your insights.

Krishnan: You're welcome, Chintan.

Mehta: For Morningstar, I'm Chintan Mehta. Thanks for watching.

Video Archives

How Trump Could Impact Economic Growth
Slowdowns in trade and immigration could hold back the U.S., and infrastructure spending could boost GDP, but it's too early to make any major changes to our economic forecast, says Morningstar's Bob Johnson.
Sustainability/ESG Landscape in India
Sivananth Ramachandran, Manager, New Product Development for Morningstar Indexes talks about the relevance of sustainability based investing in India, along with the factors that drive it.
A flexi-cap fund worth investing in
Senior analyst Himanshu Srivastava on why Reliance Equity Opportunities Fund makes for a compelling long-term investment option and why it deserves a coveted ‘Silver’.
Our take on the oldest short-term bond fund
Senior analyst Kavitha Krishnan discusses various aspects of Birla Short Term Bond Fund and deep dives into the reasons for the assigned ‘Silver’ Rating.
Review of Morningstar India Sustainability Index
Sivananth Ramachandran, Manager, New Product Development for Morningstar Indexes talks about the methodology, portfolio composition of Morningstar India Sustainability Index, and the different ways it can be utilized by Indian investors.
What Gives an Index an Edge
An index should not only be representative of the style it's trying to capture, it should also be transparent and limit unnecessary turnover, says Morningstar's Alex Bryan.
A true-blue dynamic bond fund
Senior Analyst Kavitha Krishnan points to a combination of factors as to why Birla Sun Life Dynamic Bond Fund stands out within its category.
How to choose the right mid-cap fund
Picking a mid-cap fund is tough, given the divergent performance across funds and time periods. Director of fund research Kaustubh Belapurkar points to traits that make for a successful mid-cap manager and what investors should keep in mind.
How Morningstar arrives at the analyst ratings
Director of fund research Kaustubh Belapurkar gives a low-down on the qualitative ratings of Morningstar and how investors can use them when making investment decisions.
A unique fund with a contrarian bent
The portfolio of Reliance Vision has qualitative bent with a focus on a few meaningful sectors. Senior analyst Kavitha Krishnan looks at this unique portfolio and discusses the strategy in detail.
SBI Magnum Midcap Fund bags a Bronze
Though fund analyst Kavitha Krishnan is impressed with the investment process and disciplined approach, she would like to see the processes remain stable over a longer period of time.
A debt fund for risk-averse investors
The short-term space on the fixed income side is overcrowded. Senior analyst Himanshu Srivastava highlights the traits that differentiate HDFC High Interest – Short-Term Plan from the crowd.
Baidu Troubles Highlight Challenge of Investing in China
The Chinese search giant's run-in with regulators doesn't have a major impact on our view of the firm's valuation, but the incident emphasizes regulatory and stewardship risks.
For Women, Risk Is Something to Embrace
Earning less, a shorter career, and living longer should steer women toward riskier assets, Morningstar's Laura Lutton says.
What We Learned at Berkshire
Morningstar's Gregg Warren shares the insight he gained on Berkshire's capital spending and share buyback philosophy.
Why Moats Matter
An economic moat provides a gauge of a company's competitive advantages and overall strength, and it is a highly valuable tool for investors of all levels.
Reducing the Pain of Contrarian Investing
It isn’t easy being different, but having a disciplined valuation framework can help keep your emotions in check, says GMO’s James Montier.
Should Investors Care About Sustainability?
Investors who want to have an impact may wish to allocate their capital to companies and funds that are better sustainability performers, says Morningstar's Jon Hale.
How Can You Tell if a Fund Seeks Sustainable Investments?
Morningstar's Jon Hale walks through the nuts and bolts of calculating the new sustainability rating for funds.
Financial Literacy: Just-in-Time Is the Ticket
Financial-education efforts have had depressingly little impact on individuals' decision-making when occurring too far away from the financial behavior it's meant to influence, says University of Colorado's John Lynch.
Time to Rethink Saving and Spending in Retirement
Retirees today are breaking out of the traditional saving and spending models of the past, continuing to save in their retirement years, says Vanguard's Steve Utkus.
Why China Matters to the World Economy, and Why It Doesn't
A slowing China will have a profound impact, but it isn't the be-all and end-all to the health of the global economy, says Morningstar's Bob Johnson.
How Bad Timing Can Bite in Retirement
Starting withdrawals as a bear market hits can seriously impair the sustainability of a retirement portfolio over time.
How to Fine Tune Your Investment Mix in Retirement
In addition to moving from stocks to bonds, investors may also pivot away from more volatile intra-asset-class tilts as they move into retirement, says Morningstar's Christine Benz.
Four Pressing Topics From The Berkshire Meeting
Morningstar analyst Gregg Warren gives his take on Berkshire's culture, crisis management, and more from the annual meeting.
Buffett: Interest Rates Key to Understanding Stock Valuation
In our mid-meeting update, Morningstar's Matt Coffina discusses Buffett's view of stock valuations, cost cutting, and more.
Russia's Troubles Unlikely To Lead to Worldwide Contagion
The country's economy and currency are in precipitous decline, but the U.S. economy should provide an engine for global growth, says Morningstar's Bob Johnson.
How Much Can I Afford to Save, and How Far Will It Get Me?
Parents shouldn't compromise their own retirement plans to save for their children's college expenses, but they should establish guidelines with their children for how much they're prepared to spend.
How Much Luck in Investing Success?
Michael Mauboussin explains why humans tend to overweight the role of skill and underestimate the role of luck in investing success--and how we can correct for our perceptions.
A Risk-Conscious Approach in Frontier Markets
Because frontier markets are seen as risky, risk tends to get priced more dearly, and valuations look more appropriate for the type of risk you are taking, says Wasatch Frontier Emerging Markets Small Countries Fund manager Laura Geritz.
When Stocks Are Safer
Data show that the longer investors held stocks (and stomached short-term volatility), the safer they became for meeting portfolio objectives, says Morningstar's David Blanchett.
Perks and Problems With the New myRA
These accounts have benefits for savers who are just getting going, but most will need a bigger toolkit for retirement, says Morningstar's Christine Benz.
Rethinking Risk Tolerance
Beyond their ability to stomach short-term volatility, investors should define their risk tolerance in terms of their actual risk capacity and the probability of hitting their retirement goals, says Morningstar's Christine Benz.
Getting Your Arms Around Risk
Fund investors should think beyond volatility measures alone when sizing up the risk in their portfolios, says Morningstar's Shannon Zimmerman.
Three Main Variables in the Retirement Cost Equation
New research from Morningstar Investment Management examines the key factors that drive income replacement rates, trends in retirement spending, and the duration of retirement.
Greenblatt: Patience - the Secret to Value Investing
Value investing works like clockwork, but your clock has to be really slow, says the Columbia professor and CIO of Gotham Asset Management.
Mutual Fund Tools