Aditya Birla Sun Life Flexi Cap Fund | Aditya Birla Sun Life Flexi Cap Fund Direct Plan Growth | Fund Overview

A new yet seasoned manager and a proven investment approach help maintain the fund’s appeal.

Himanshu Srivastava

Principal

Summary

A new yet experienced manager, employing a disciplined and consistent investment approach, helps sustain this fund’s appeal. However, the manager's relatively high workload and recent team turnover warrant an Average People Pillar. Nevertheless, the well-defined strategy with a proven track record merits an Above Average Process Pillar.

The fund’s long-term manager Anil Shah, who led the fund since October 2012, departed the firm in November 2023, passing the reins to Harish Krishnan, who joined the fund house in October 2023 from Kotak Mutual Fund. He is an experienced manager with more than a decade of portfolio management experience. At Aditya BSL Mutual Fund, he has been appointed co-CIO and head-equities, and he leads the equity investment team here. He in turn reports to CIO Mahesh Patil, also a seasoned manager.

In addition to team management, Krishnan is responsible for managing four distinct strategies, resulting in a relatively high workload. Furthermore, the equity investment team has witnessed turnover in recent years, with a few key managers and analysts leaving the firm. Although the team is large, we would still like to see greater stability, particularly at the fund management level, to restore its overall expertise. From this perspective, we view Krishnan’s inclusion in the team as a significant positive but our concerns remain.

Despite the managerial change, the fund’s overarching investment strategy and framework remain largely consistent. There is a fair bit of similarity between Shah’s and Krishnan’s investment style, ensuring the fund’s core structure remains intact. However, they differ in their company selections and top-down research processes, resulting in some portfolio adjustments. Krishnan is methodical and avoids making sudden, drastic changes. Instead, he adopts a staggered approach, waiting for the right moment to implement the changes.

Krishnan applies a similar investment approach in Aditya BSL Flexicap as he did while managing Kotak Bluechip at Kotak Mutual Fund. His method is well-defined and has a proven track record under his leadership. Although these funds belong to different Morningstar Categories, we believe Krishnan’s investment strategy has the necessary strengths to perform well in the flexicap category, too. We don’t have concern around Krishnan’s fund management skills. However, we are adopting a cautious approach given he is new in the system and his workload is high. We would also like to observe how the team evolves under him and regains stability.

by Himanshu Srivastava

Rated on Jun 3, 2024, Published on Jun 3, 2024

Harish Krishnan’s investment philosophy centers on achieving reasonable growth, maintaining reasonable valuations, and investing from a longer-term perspective.

Process

Above Average

His overarching goal is to deliver stable performance while minimizing the fund’s underperformance during challenging market conditions.

He plies a combined top-down and bottom-up investment approach. The top-down views are incorporated at a sector level followed by a bottom-up stock-selection process, where the manager tries to shortlist best-in-breed companies from various sectors based on his conviction level. Krishnan believes that every sector goes through its own cycle, and in a down cycle if investment is made in best-in-breed companies, it will more than make up for it during an upcycle.

As per Krishnan’s investment approach, the stock must qualify in at least one out of three parameters to be considered best-in-breed: the company can gain market share even in a down cycle; the margin profile of the company is materially different from its peers; and the ROC profile or capital efficiency profile of the company is materially different from its peers.

From a top-down perspective, the manager prefers sectors having a growing profit pool share, justifiable growth in market cap share, and relatively low ownership. The analysis is done over a period of 25 years, providing the team with insights into where each sector has operated in. This extensive analysis aids in forecasting potential cyclical changes over the next three to five years.

Krishnan is at home with this investment process, which boasts a proven track record. We believe this investment strategy possesses essential strengths to perform well over the long term. We maintain an Above Average Process rating.

The combination of top-down and best-in-breed stock selection forms the basis of portfolio construction. Broadly, the investment approach and structure haven’t changed significantly, despite the change in manager. The top-down approach, growth-at-a-reasonable-price style of investing with more focus toward growth and benchmark-aware approachness stays consistent. It has been a low-turnover portfolio under Anil Shah, and we expect the same to continue under Harish Krishnan as well.

However, there are a few dissimilarities as well, largely with respect to stock selection. Erstwhile manager Shah didn’t shy away from investing in companies having debt if they offered higher growth prospects. In contrast, Krishnan doesn’t like high exposure to debt-heavy companies. After taking over, he has tried to bring down the active share in individual positions, especially in companies with high debt.

Given the prominence of the top-down approach in portfolio construction, Krishnan is market-cap-agnostic, as the allocation in a market segment is also driven by his sector view. He prefers constructing a diversified top-heavy portfolio with a long tail. The idea is to construct a balanced portfolio with bigger representation from his high-conviction holdings and to also have exposure to companies where conviction can be built over time.

Krishnan is a process-oriented manager and doesn’t believe in making drastic and immediate changes in the portfolio. He would rather adopt a staggered and methodical approach to bringing changes considering the merit of each position. From the portfolio construction perspective, he is focusing on pharma, consumer durables, metals, and media; he is watchful of sectors such as consumer staples, defense, and financials.

by Himanshu Srivastava

Rated on Jun 3, 2024, Published on Jun 3, 2024

There has been a change in manager here.

People

Average

Anil Shah, who helmed this fund since October 2012, departed from the fund house in Nov 2023. This was Shah’s first stint at running a mutual fund when he took over its mantle. Over the years, he managed to establish a good track record for the fund.

On a positive note, the fund house has brought in an experienced manager, Harish Krishnan, to replace Shah. Krishnan joined in October 2023 as co-CIO and head of equities and began managing the fund in November 2023. Despite being new to Birla, Krishnan brings 21 years of experience in research and portfolio management, having previously been with Kotak AMC since 2005. At Birla, Krishnan is the lead manager on four distinct strategies and handles team management responsibility with the equity investment team now reporting to him. He in turn reports to CIO Mahesh Patil. This we believe is a relatively high workload.

From an overall team perspective, CIO Mahesh Patil is a seasoned manager with 32 years of experience in fund management and research. The research team is well-resourced and experienced. However, aside from Patil and Krishnan, the other fund managers have yet to establish noteworthy long-term track records. The team has experienced turnover in recent years, with several key analysts and managers leaving. Most of these departures have been addressed internally by promoting experienced analysts to fund manager roles.

While we have no concerns about Krishnan’s fund management capabilities, which are well-established. But we are cautious regarding his workload and the team’s turnover in recent years. We want to see how the team evolves under his leadership before building conviction. We therefore assign an Average People rating.

by Himanshu Srivastava

Rated on Jun 3, 2024, Published on Jun 3, 2024

Having been in existence since 1994, the Aditya Birla Sun Life Asset Management Company is backed by a strong parent in the form of Aditya Birla Capital, eventually flowing up to the Grasim Group of Companies.

Kavitha Krishnan

Senior Analyst

Parent

Average

Sun Life Financials owns a stake in the business, about 36.5%, with about 13.5% of the shares owned publicly. The AMC’s offerings span across mutual funds, portfolio management services, real estate investments, and alternative investment funds, with total assets under managerment of over Rs. 2,938(Sept. 30, 2022).

They have two co-heads, both on the equity and fixed-income side, with Mahesh Patil as their overall CIO. The analyst team is well experienced and has largely remained stable. The team has managed departures and transitions effectively in the past and has also been expanding the team with a view to add coverage responsibilities across sectors. Overall, we think that this is among the larger teams within the industry and that it is well-resourced. Risk management is embedded into the processes, with there being a lot of focus on ensuring that the funds follow a consistent investment approach. The fund house’s foray into passive funds has resulted in a lot of new fund launches over the recent past. This, in addition to the lack of a dedicated team to manage these funds, could place some pressure on existing resources. Overall, we think that the fund house is well placed within the industry and is well supported by an experienced and stable team.

by Kavitha Krishnan

Rated on Dec 28, 2022, Published on Dec 28, 2022

Since Harish Krishnan has been managing this fund for just six months, it’s difficult to draw meaningful conclusions.

Himanshu Srivastava

Principal

Performance

However, under former manager Anil Shah, the fund remained in the second or third quartile on a consistent basis. Even during phases when the fund underperformed, its performance never fell into the fourth quartile, which was reflective of Shah’s effective execution of the investment strategy.

Under Shah (Oct. 3, 2012-Nov. 3, 2023), the fund’s regular share class has clocked an annualized return of 15.4%, outperforming both its index (14.0%) and peers (14.1%). It outperformed 79% of category peers. However, in recent years under Shah, the fund's performance fell short of expectations, affecting its three- and five-year track record.

In 2021, the fund underperformed the index and category average owing to market volatility and momentum-based investing in sectors where the manager was underweight. It landed in the third performance quartile in 2022, hit by poor performance in the financials, technology, and capital goods sectors. The markets also witnessed frequent sector rotations over the past few years, which the manager, with his long-term approach to investing, couldn’t capitalize on. The scenario improved slightly in 2023 when the fund marginally outperformed the index, although it continued to lag peers, with the manager’s investment style out of favor.

Given Krishnan's extensive experience and his proven execution of the investment strategy, the fund can be expected to deliver well over the long term.

by Himanshu Srivastava

Published on Jun 3, 2024

It’s critical to evaluate expenses, as they come directly out of returns.

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Bronze.

by Himanshu Srivastava

Published on Jun 3, 2024

	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	YTD
Investment	3.87	16.24	35.07	-3.03	9.53	17.11	31.38	-0.27	26.99	19.49	-2.99
Category	N/A	N/A	N/A	N/A	N/A	N/A	31.54	0.31	28.36	21.05	-7.71
Index	0.45	5.15	37.60	-1.81	8.98	18.41	31.63	4.77	26.55	15.81	N/A
Quartile Rank	Quartile Rank is second	Quartile Rank is first	Quartile Rank is third	Quartile Rank is second	Quartile Rank is second	Quartile Rank is second	Quartile Rank is third	Quartile Rank is third	Quartile Rank is third	Quartile Rank is second	Quartile Rank is first
Percentile Rank	47	4	66	32	47	35	59	51	58	47	10
# of Invest. in Cat.	—	—	—	—	—	—	164	182	204	242	240
Category Name	IN048 India Fund Multi-Cap	IN048 India Fund Multi-Cap	IN048 India Fund Multi-Cap	IN048 India Fund Multi-Cap	IN048 India Fund Multi-Cap	IN048 India Fund Multi-Cap	IN077 India Fund Flexi Cap	IN077 India Fund Flexi Cap	IN077 India Fund Flexi Cap	IN077 India Fund Flexi Cap	IN077 India Fund Flexi Cap

Asset Class	Investment	Category	Index
Equity	98.10	93.61	100.00
Fixed Income	0.00	0.31	0.00
Preferred	0.00	0.00	0.00
Convertible	0.00	0.00	0.00
Cash	1.90	6.46	0.00
Other	0.00	0.00	0.00

Portfolio Holdings	# Long	# Short
Equity Holding	76	0
Bond Holding	0	0
Other Holding	5	0
Total Holding	81	0

Holdings	% Portfolio Weight	First Bought	Market Value as of Mar 31, 2025	Cur Currency	Share Change %	1-Year Return	Forward P/E	Equity Star Rating	Economic Moat	ESG Risk Rating Assessment	Sector
ICICI Bank Ltd	8.40	Nov 30, 2016	18,202,725,000	INR Indian Rupee	0.00	28.05	18.80		—	—	Financial Services
Kotak Mahindra Bank Ltd	4.57	Feb 28, 2019	9,908,666,000	INR Indian Rupee	0.00	18.57	—		—	—	Financial Services
HDFC Bank Ltd	4.56	Jul 31, 2008	9,879,920,000	INR Indian Rupee	0.00	25.72	—		—	—	Financial Services
Infosys Ltd	4.40	Apr 30, 2005	9,539,313,000	INR Indian Rupee	4.59 % Decrease	3.37	19.12		Narrow	—	Technology
Reliance Industries Ltd	4.03	May 31, 2019	8,736,905,000	INR Indian Rupee	0.91 % Increase	-15.11	—	Momentum	—	—	Energy
Bharti Airtel Ltd	2.71	Nov 30, 2017	5,863,770,000	INR Indian Rupee	0.00	50.49	—		—	—	Communication Services
Sun Pharmaceuticals Industries Ltd	2.61	Dec 31, 2018	5,651,816,000	INR Indian Rupee	3.18 % Decrease	11.12	—		—	—	Healthcare
HCL Technologies Ltd	2.55	Nov 30, 2011	5,526,943,000	INR Indian Rupee	3.59 % Decrease	0.97	—		—	—	Technology
Radico Khaitan Ltd	2.23	Apr 30, 2014	4,839,515,000	INR Indian Rupee	0.00	39.13	—		—	—	Consumer Defensive
Axis Bank Ltd	2.20	Sep 30, 2019	4,769,729,000	INR Indian Rupee	1.88 % Increase	10.42	—		—	—	Financial Services

Holdings	% Portfolio Weight	Market Value	Cur Currency	Prospectus Net Expense Ratio	1-Year Return	Morningstar Rating	Medalist Rating	Total Assets	Morningstar Category
Clearing Corporation Of India Limited	0.90	1,948,153,000	—	—	—	—	—	—	—
Reverse Repo	0.45	974,499,000	—	—	—	—	—	—	—
Margin (Future And Options)	0.38	818,837,000	—	—	—	—	—	—	—
Net Receivables / (Payables)	0.18	385,835,000	—	—	—	—	—	—	—
Cash And Bank	0.00	21,000	—	—	—	—	—	—	—

Aditya Birla Sun Life Flexi Cap Fund Direct Plan Growth INF209K01XX1

Aditya Birla Sun Life Flexi Cap Fund Direct Plan Growth

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