HOME > MUTUAL FUND > CITRUS ANALYSIS
  CITRUS ANALYSIS
MUTUAL FUNDS NEWS
Tata Equity Opportunities Fund: Turnaround story?
Tue, Feb 02, 2016
Source : Khyati Shah, Citrus Interactive

Tata Equity Opportunities Fund is an open ended multi-cap oriented equity diversified fund. The investment objective of the scheme is to provide income distribution and/ or medium to long term capital gains while all times emphasizing the importance of capital appreciation. The fund was launched in February 1993 and is benchmarked against the S&P BSE 200 Index. The fund has an AUM of Rs. 1,130 crores as on December 31, 2015. It is interesting that the fund has almost doubled in size compared to last year December 31, 2014 (Rs. 567 crores).

Performance:

Tata Equity Opportunities Fund has a very good performance track record of consistently outperforming its benchmark index and the equity diversified category average across all time frames as shown from the table given below, except for 2 years’ time frame where it has underperformed its category average marginally (by 0.32 percentage points). Since inception it has outperformed its benchmark by 1.52 percentage points. It has been in top quartile of its peer-set in 6 months and 1 years’ time frame and in 2 and 5 years’ time frame it has been in the second quartile of its peer-set.

Scheme Name

6 Months

1 Year

2 Years

5 Years

Since Inception

Tata Equity Opportunities Fund (G)

-8.21

-5.43

24.03

13.52

12.29

S&P BSE 200 Index

-11.08

-12.36

14.75

7.05

10.77

Category Average

-10.32

-7.73

24.6

12.2

NA

Rank

31/161

47/158

62/149

45/137

NA

Figures are in % as on January 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that this fund has beaten its benchmark in all the last five calendar years. It has beaten its category average in the year 2011, 2013 and 2015 but it has underperformed in the year 2012 (marginal underperformance) and 2014.

Scheme Name

2011

2012

2013

2014

2015

Tata Equity Opportunities Fund (G)

-23.03

33.72

8.69

48.54

6.57

S&P BSE 200 Index

-26.95

30.98

4.38

35.47

-1.48

Category Average

-23.95

34.05

5.43

53.99

3.63

Rank

61/138

59/142

34/146

80/149

43/158

All figures in %

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category median.

 

Standard Deviation

Beta

Tata Equity Opportunities Fund (G)

0.92

0.88

Category Median

0.95

0.89

Risk-adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

Tata Equity Opportunities Fund (G)

0.08

0.08

Category Median

0.06

0.07

 

Portfolio Characteristics:

Sector Concentration:  The fund’s concentration in the top 3 and 5 sectors is higher than the category median whereas the fund’s concentration in the top 10 sectors is lower than the category median.

 

Top 3

Top 5

Top 10

Tata Equity Opportunities Fund (G)

36.57

49.88

68.85

Category Median

33.43

49.44

70.09

 

Company Concentration: The concentration of funds in top 3, 5 and 10 companies in its portfolio is significantly lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

Tata Equity Opportunities Fund (G)

14.16

20.61

34.71

Category Median

18.69

27.5

44.45

 

Number of equity holdings: The fund currently holds 60 stocks in its portfolio (December 31, 2015), which is higher than the median stock count for the diversified-equity category, which currently stands at 45. Based on equity count the fund runs a more diversified portfolio compared to its peer set. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 48.

Thus, based on criteria such as equity count, sector concentration and company concentration, one can conclude that the funds maintain a fairly diversified portfolio.

Cash allocation: Its cash allocation at the end of December 2015 was 4.46 per cent. The average cash allocation for last five years is 2.93 per cent. Its maximum allocation to cash over last two years was 7.00 per cent in March 2014 and lowest was 1.76 per cent in June 2014. In 2015 it had an average cash allocation of 4.28 per cent.

Portfolio Insights: The top 5 sectors in the portfolio had an allocation of 49.88% which is slightly higher than the category average of 48.36%. The top 5 sectors include Private sector Banks, Pharmaceuticals, Engineering - Construction, IT - Software and Cement & Construction Materials.

The fund’s exposure to cyclical stocks currently is 70.54% followed by Defensives with 15.62% and Services with 9.36%. The Top five holdings are HDFC Bank Ltd, Sadbhav Engineering Ltd., Tata Motors Ltd., Jet Airways (India) Ltd. and Maruti Suzuki India Ltd.

In the last six months the fund has bought stocks of Aditya Birla Nuvo Ltd., Alkem Laboratories Ltd., Ambuja Cements Ltd., Indian Oil Corporation Ltd., Oil & Natural Gas Corporation Ltd., Reliance Industries Ltd., Sadbhav Infrastructure Project Ltd., SKS Microfinance Ltd. and Union Bank Of India

Stocks of BEML Ltd., Bharti Airtel Ltd., Astra Microwave Products Ltd., Astral Poly Technik Ltd., Shriram Transport Finance Company Ltd., IRB Infrastructure Developers Ltd., Coromandel International Ltd., Wipro Ltd., Sterlite Technologies Ltd., Ashok Leyland Ltd. and Hindustan Petroleum Corporation Ltd. have been dropped from the portfolio.

The stock of GAIL (India) Ltd. was bought in the month of September 2015 and was sold in November 2015 which within 2 months of buying.

The fund has evenly spread the portfolio between large and mid caps. There are 40 stocks with market cap above Rs 10,000 crs and 20 stocks with market cap below that in the portfolio. The mid caps carry a weight of 30% in the portfolio, and large caps make up 65% of the weight.

True to its objective, there are a number of stocks such as Sequent Scientific, Jet Airways, KNR Construction, Kajaria Ceramics etc which are either turnaround stories or which have been re rated by the market and have found a prominent place in the portfolio and contributed to its performance last year.

 

Process:

The Tata Equity Opportunities Fund aims at proactively taking advantage of Potential Capital appreciation opportunities in the market. Positioned as a “stock picker's delight”, it is a diversified equity fund which undertakes rigorous research to identify opportunities in equity markets that could be for instance, turnaround companies or stocks being re-rated by the market, companies benefitting from changing economic fundamentals, etc.

It invests in small, medium and large cap stocks wherever the fund manager spots an opportunity. It is hence very actively managed and dynamic in nature, although stock picking is based on bottom-up approach. The fund has no style bias – it follows a mix of both ‘value’ and ‘growth’ strategies based on the opportunities.

Atleast 65% of the funds will be invested in equities & equity related instruments and upto 35% Debt and Money Market instruments. Primary focus on investing in equity and equity related instruments of well researched value and growth oriented companies across all market capitalization. Investments in derivative instruments may be done for hedging and Portfolio balancing. The scheme will have a maximum derivative net position of 50% of the net assets of the scheme. Not more than 25% of the net assets of the scheme shall be deployed in securities lending. The Scheme would limit its exposure, with regards to securities lending, for a single intermediary, to the extent of 5% of the total net assets of the scheme at the time of lending.

The fund’s expense ratio is 2.82% which is much higher than the category average of 2.34%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Fund Manager

Tata Equity Opportunities Fund is managed by Pradeep Gokhale and Rupesh Patel.

Mr. Pradeep Gokhale holds a degree of B.Com, CA and CFA with over 21 years of experience He joined Tata Asset Management Ltd. as Deputy General Manager, Investment in 2004. Currently he is Head of Research / Fund Manager & Reporting to the Co-Head Equities. In the past, he has worked with Lubrizol India, Tata International Ltd. and Bombay Dyeing in the finance and taxation departments. He was Deputy General Manager with Credit Analysis and Research Ltd. He has been managing this fund since June 2013. Other funds managed by Mr. Gokhale are Tata Ethical Fund and Tata Pure Equity Fund. He is also the co-Fund manager for Tata India Consumer Fund.

Mr. Rupesh Patel has more than 14 years of experience spread across listed equity investments, private equity real estate investments, credit risk assessment and evaluation of infrastructure projects. He has worked in Equity Research and as Head of TATA PMS investments during his association with Tata Asset Management Limited since May 2008. Prior to joining Tata Asset Management, he worked with Indiareit Fund Advisors Private Limited in their investments team and also held directorships to represent Indiareit Fund Advisors Private Limited on the boards of investee companies. He also worked as head of the corporate sector ratings group at Credit Analysis & Research Limited (CARE). Mr. Rupesh Patel is a graduate in engineering from Sardar Patel University, Gujarat and holds a Masters in Business Administration from Sardar Patel University, Gujarat. He is the co-Fund manager for Tata Young Citizens Fund and Tata Retirement Savings Fund – Conservative Plan.

 

View:

Tata Equity Opportunities Fund is a multi-cap fund, which invests in small, medium and large cap stocks wherever the fund manager spots an opportunity. It aims to invest in fundamentally good stocks over the medium to long term horizon. This is one of the best funds from Tata Mutual Funds and is shining among the multi cap fund category for its performance. This has not gone unnoticed by investors and the fund size has almost doubled in the last one year. Those investors who are looking for investment opportunities in equity markets by investing in companies undergoing re-rating or turnaround or benefiting from changing economic scenario may find this fund quite suitable for them.

 
|
|
|
|
|
|
|
|
|
 
blog comments powered by Disqus
  RELATED NEWS >>