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Birla SL Small & Midcap Fund: Small but mighty
Sat, Aug 13, 2016
Source : Yash Jashnani, Citrus Interactive

Birla Sun life Small & Midcap Fund is an open ended mid cap equity diversified Fund. The primary objective of the scheme is to generate consistent long-term capital appreciation by investing predominantly in equity and equity related securities of companies considered to be small and mid-cap.

 

The scheme was launched as a close ended small and mid cap equity scheme with a maturity period of 3 years with an automatic conversion into an open ended scheme upon maturity. The NFO of the scheme was kept open from April 09, 2007 to May 18, 2007, and maturity date for the scheme was May 31, 2010. It is benchmarked against NIFTY Free Float Midcap 100. The Fund has an AUM of Rs 267 crore as on 31st July 2016 which has increased by Rs 72 crore as compared to last year 31st July 2015.

 

Performance

 

The fund’s performance across various time horizons is extremely good as seen in the table given below. It has beaten its benchmark throughout the time horizon in all time periods. It has done better than the equity diversified category in all the time periods.


Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

Birla Sun life Small & Midcap Fund

13.37

22.9

16.14

37.59

19.19

12.4

 NIFTY Free Float Midcap 100

10.27

18.47

7.61

29.08

12.99

11.06

Category Average

8.92

16.09

4.15

26.45

15.12

NA

Rank

14/163

2/163

2/159

19/146

27/138

NA

 

Figures are in % as on 31st July 2016; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

 

In terms of the calendar year returns the fund has beat the benchmark in 2011, 2013, 2014 and 2015 but has not beaten its benchmark in 2012. It has generated higher returns than the equity diversified category in 2011, 2014 and 2015 but has underperformed in 2012 and 2013 compared to its category average as shown in the table below.

 

Scheme Name

2011

2012

2013

2014

2015

Birla Sun life Small & Midcap Fund

-23.32

31.88

4.83

66.29

13.43

 NIFTY Free Float Midcap 100

-31

39.16

-5.1

55.91

6.46

Category Average

-23.92

34.25

5.43

54.21

3.76

Rank

64/134

76/140

86/144

35/147

 12/156

All figures in %

 

Risk: In terms of measures of risk such as standard deviation (measured over the last 3 years), the fund has taken higher risk compared to category median and in terms of Beta the fund has taken lower risk.

 

 

Standard Deviation

Beta

Birla Sun life Small & Midcap Fund

1

0.77

Category Median

0.98

0.89

 

 

Risk-Adjusted Return: In terms of Treynor and Sharpe ratio (measured over the last 3 years), the fund has proved higher risk-adjusted returns than the category median.

 

 

Treynor

Sharpe

Birla Sun life Small & Midcap Fund

0.17

0.12

Category Median

0.07

0.06

 

 

Portfolio

 

Sector concentration: The fund’s concentration in the Top 3, Top 5 and Top 10 sectors is lower than the category median.

 

 

Top 3

Top 5

Top 10

Birla Sun life Small & Midcap Fund

24.69

37.27

61.44

Category Median

36.36

49.44

70.09

 

 

Company concentration: The Fund’s Concentration in the Top 3, Top 5 and Top 10 Companies is lower than the category median.

 

 

Top 3

Top 5

Top 10

Birla Sun life Small & Midcap Fund

13.72

19.12

32.06

Category Median

18.77

27.25

43.96

 

 

Sector and Company Concentration signifies that the funds maintain a fairly diversified portfolio.

 

 

Number of Equity Holdings: The Fund currently holds 41 stocks in its portfolio (30th June 2016), which is lower than the median stock count for the equity diversified category, which currently stands at 47. In the last 5 years the number of equity holding averages to 52.

 

Cash Equivalent:        

Its cash equivalent for July was 9.58 per cent. The average cash allocation for the last five years is 4.8 per cent. Its maximum allocation to cash over the last two years is 9.58 percent in July 2016 and lowest was 0.14 percent in April 2014. In 2016 it had an average cash allocation of 6.34 per cent.

 

Portfolio Characteristics:

 

The Top 5 sectors include Pharmaceuticals & Drugs, Finance-NBFC, Engineering-Constructions, Textile and Electric Equipment.

 

In the last 6 months the fund has bought Ujjivan Financial Services, Biocon, Torrent Pharmaceuticals, Advanced Enzyme Technologies Ltd., Indo Count Industries, Akzo Nobel India, Hinduja Global Solutions, Sterlite Power Transmission, Bank of Baroda, JK Cement Ltd., The India Cements Ltd. and V-Guard Industries Ltd.

 

Stocks of Kansai Nerolac Paints, Granules India, Divis Laboratories, Finolex Cables, Sanghi Industries, Karur Vysya Bank, Wabco India, Precision Camshafts, Cholamandalam Investment & Finance Company Ltd., Finolex Cables Ltd., Karur Vysya Bank Ltd., Tube Investments of India Ltd. and Wabco India Ltd. have been dropped from its portfolio.

 

Process

 

The scheme would invest in Equity and Equity Linked Instruments of Small and Mid-Cap companies out of which 10%-50% would be invested in Small Cap and 35%-100% would be invested into Mid Cap. For the purpose of this Scheme, "Mid Cap" is defined as those stocks, which would fall in the market capitalization range of Nifty Free Float Midcap 100 index. The Companies having market capitalization below this range shall be considered as Small Cap stocks and the Companies falling above this range shall be considered as Large Cap stocks.

 

0-35% would also be invested in other Equity and Equity related instruments including derivatives and  0-20% would be invested in Fixed Income Securities.

 

The fund manager selects equity securities on a bottom-up stock selection approach. Under bottom-up approach, the main focus is on identifying stocks on their individual merits irrespective of the sectors to which they belong as opposed to first identifying sectors and then choosing stocks within that sectors which is followed under top-down approach. Hence, under bottom-up approach among other things, consideration will be given to fundamentals of the companies, management quality & strength of their businesses. Apart from sound fundamentals and management, the fund would lay emphasis on valuations and long term growth potential. The focus would be on long-term fundamentally driven values. However, short-term opportunities would also be seized, provided they are supported by underlying values.

 

Fund Manager

Mr. Jayesh Gandhi is a Fund Manager and part of the equity team at the firm. Previously, he was a Portfolio Manager at Morgan Stanley investment Management Private Limited since August 2007.

 

Mr. Gandhi has a vast experience in investment management and equity research. He has been managing Birla Sun Life Small & Midcap Fund since December 2014. He also manages Birla Sun Life Mid Cap Fund, Birla Sun Life Emerging Leaders Fund - Series 5, Birla Sun Life Emerging Leaders Fund - Series 7 and Birla Sun Life Emerging Leaders Fund - Series 1.

 

He holds the Degree in Chartered Accountant and Chartered Financial Analyst designation and he also holds a Degree in Masters of International Management.

 

 

Our View

 

Birla SL Small & Midcap Fund has seen growing popularity, thanks to its noteworthy performance compared to the benchmark as well as peers. The fund has benefited from the stock picking skills of the fund manager. It comes with a higher risk because of the exposure to small and mid cap stocks. So it is suitable for aggressive investors with a long time horizon.

 

 
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