Management
Portfolio manager Sunil Singhania is managing this fund since December 2004. Prior to Reliance, he worked for a broking outfit for six years. He has overall 15 years of investment management experience.
The portfolio manager is a respected name in the Indian mutual fund industry for his superior track record in managing equity funds at Reliance Mutual Fund. Overall, there are six fund managers, which are supported by 15 research analysts in all.
Strategy
This is a mid-cap oriented fund. It seeks to invest 65-75% of its corpus in mid-cap stocks and the rest in large-cap stocks. The investment in large-cap stocks is primarily to achieve capital appreciation and liquidity. The fund strives to exploit opportunities across market caps and investment styles-growth, value, etc., The portfolio manager strives to idenfity companies with strong potential for growth over 3-5 years period, driven by strong management team.
Costs
This is the third cheapest actively managed fund in the Morningstar India Small/Mid Cap category. The fund’s annual expense ratio was at 1.77% as per its recently filed annual report, as compared to category average of 2.36%. The lower expense ratio was owing to an increase in assets over a period of time.
Performance
The fund displayed strong performance in the long run, owing to the fund manager’s strong stock selection approach. The fund was ranked at first position within the Small/Mid Cap category, during the last 10-year period.
The fund’s trailing return since inception (August 1995) was 28.9%, higher than the benchmark, which posted 11.8% return. However, in the short-term, especially during 2008, the fund lagged its benchmark as well as peers.
During 2008, it registered -54.1% return, underperforming benchmark by 1.66%, primarily owing to its cash allocation. When the markets recovered during March-June 2009 period, the fund featured in the second quartile, particularly at the 31st position out 69 funds available in this category.
The fund had 23% in cash in April 2009, however, the manager was quick enough to cut cash and fully invested in equities at the end of May 2009. Performance over calendar years was quite phenomenal since 2002 as the fund always featured in the top quartile except during 2008 and YTD period to June 2009.
Overall, the fund performed well in up markets and declined less in down markets as reflected by its up capture and down capture ratios 112% and 91% respectively. The fund’s volatility of 33% over the last 5-years period was marginally higher than the corresponding figures turned in by its benchmark and peers at 32% each.
Stewardship
Reliance is an aggressive name in the asset management business. The fund house has successfully managed its equity assets and therefore assets of Reliance Growth and Reliance Vision increased significantly in the past. The fund house doesn’t hesitate to close funds when manager believes their flexibility may be jeopardized in the near future either by sheer size or the pace of inflows.
Indeed, the fund closed to new investors in July 2005 when its assets touched Rs 13.2 billion. Since, the fund invests in mid- and small-cap stocks, this was a commendable move as large size of the fund could have jeopardized its performance. The manager also invests his money in the fund. He, however, did not disclose the quantum of his investments on a confidentiality ground.
Conclusion
This is the most fundamentally sound mid-cap stock fund around. The fund is five stars rated by Morningstar in 3-, 5- and 10-years investment periods. This fund is appropriate as a core holding for those, who would like to have a slice of their investments in the small/mid cap space.