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L&T Infrastructure: Topping the charts
Fri, Nov 10, 2017
Source : Yash Jashnani, Citrus Interactive

L&T Infrastructure Fund is an open ended equity diversified fund. The investment objective of the scheme is to generate capital appreciation by investing predominantly in equity and equity related instruments of companies in the infrastructure sector. The fund has an AUM of Rs 967 crore as on October 2017 which has increased by Rs 715 crore compared to last year October 2016.

Performance

The fund’s performance across various time horizons is excellent as seen in the table given below. It has outperformed its benchmark and the category average in all time periods studied. It continues to be among the top 2 funds in terms of ranking.

 

Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

L&T Infrastructure Fund 

53.14

19.91

43.53

22.31

23.52

6.03

Nifty Infrastructure Index

32.06

10.03

25.12

3.00

7.57

-2.24

Category Average

39.62

12.56

29.62

15.04

17.62

N.A.

Rank

1/22

1/22

2/22

1/22

2/22

N.A.

 

Figures are in % as on 31st October 2017; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

In terms of the calendar year returns the fund has beaten its benchmark in all time periods except in the year 2013. The fund has outperformed its category average in all time periods.

Scheme Name

2012

2013

2014

2015

2016

L&T Infrastructure Fund 

28.6

-6.96

65.53

6.78

8.56

Nifty Infrastructure Index

21.65

-4.16

22.71

-8.91

-2.05

Category Average

27.38

-9.12

62.63

-0.21

4.79

Rank

8/22

7/22

8/22

1/22

1/22

All figures in %

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

 

Standard Deviation

Beta

L&T Infrastructure Fund 

1.12

0.94

Category Median

1.17

1.04

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

 

 

Treynor

Sharpe

L&T Infrastructure Fund 

0.1

0.09

Category Median

0.07

0.08

Portfolio

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

 

Top 3

Top 5

Top 10

L&T Infrastructure Fund 

28.59

42.74

66.27

Category Median

40.26

50.37

71.79

Company concentration: The fund’s Concentration in the top 3, 5 and 10 companies is lower than the category median.

 

Top 3

Top 5

Top 10

L&T Infrastructure Fund 

14.05

20.15

33.57

Category Median

17.78

26.67

45

Number of Equity Holdings: The fund currently holds 50 stocks in its portfolio (30th September 2017), which is higher than the median stock count of the Infrastructure category, which currently stands at 39. In the last 5 years the equity holding averages to 47.

Stock count, sector and company concentration signifies that the funds maintain a fairly diversified portfolio.

Cash and Cash Equivalent:        

Its cash equivalent for September 2017 is 5.88%. The average cash allocation for the last five years is 5.7%. Its maximum allocation to cash over the last two years is 10.06% in September 2016 and lowest was 0.82% in June 2016.

Portfolio Characteristics

The top 5 sectors include Engineering – Construction, Construction – Real Estate, Engineering – Industrial Equipments, Cement and Construction Materials and Cable.

In the last 6 months the fund has bought Arihant Superstructures Ltd., Cummins India Ltd., Hindustan Petroleum Corporation Ltd., Idea Cellular Ltd., Lakshmi Machine Works Ltd., Navkar Corporation Ltd., NMDC Ltd., Oil & Natural Gas Corporation Ltd., Poddar Housing and Development Ltd., The India Cements Ltd. and Vedanta Ltd.

Stocks of BEML Ltd., Cairn India Ltd. (Amalgamated), Hindalco Industries Ltd., Kalyani Steels Ltd.KEC International Ltd., NCC Ltd., NTPC Ltd., PNC Infratech Ltd, PTC India Ltd., Sanghvi Movers Ltd., Shree Cement Ltd., Suzlon Energy Ltd., Tata Power Company Ltd., Transformers & Rectifiers (India) Ltd. and VRL Logistics Ltd. have been dropped from the portfolio.


Process

The Scheme will invest primarily in companies that are engaged in the area of infrastructure. The scheme will also use derivative instruments such as index, stock futures or options for portfolio rebalancing, hedging and return optimization.

The fund uses a system that it believes can assemble a portfolio of securities that is neutral and that consistently outperforms traditional strategies that focus on a single style, such as value or growth. Since the Scheme is based on Infrastructure theme, the fund manager will focus mainly on companies that offer an opportunity to participate in the growth of infrastructure sector.

The aim would be to select fundamentally sound companies having potential to deliver superior earnings growth in the long run. The fund manager would adopt both, top-down and bottom-up approach for stock selection. Under top –down approach, the aim would be to identify industries in the infrastructure sector that can offer long-term growth and under bottom-up approach, the aim would be select companies with high profitability and scalability supported by sustainable competitive advantages. These companies will have a long term growth prospect and will be measured on earning potential. The Benchmark Index of the fund is Nifty Infrastructure Index.

The scheme would invest 65% of the corpus in equity and equity related instruments and derivative instruments and may go up to 100%. The investment in debt and money market instruments would be in the range of 0-35%.

Fund Manager

Soumendra Nath Lahiri

Mr. Soumendra Nath Lahiri has been the Head of Equities at L&T Investment Management Limited since September 2012 and also serves as its Fund Manager. He serves as Head of Equities and Fund Manager of various L&T Mutual Funds. 

He served as a Senior Vice President at L&T Investment Management Limited from September 17, 2012 till November 24, 2012. Previously he served as the Head of Equities and a Fund Manager at Canara Robeco Asset Management Company Ltd. from April 2011 to September 2012. He served as the Head of Equities and Fund Manager of various Canara Robeco Mutual Funds.

Mr. Lahiri served as the Chief Investment Officer of PMS Equity Investment at Emkay Investment Managers Ltd. from January 2011 to March 2011. He served as the Chief Investment Officer of Emkay Global Financial Services Limited. He served as Head of Equities of Dolat Investments Limited from September 1995 to May 2004. He served as the Chief Investment Officer of Advisory Services at Fortuna Capital from May 2008 to December 2010.

Mr. Lahiri was the Co-Head of Equities at DSP Merill Lynch Investment Managers Private Limited from June 2004 to March 2008. Mr. Lahiri served as a Co-Head of Equities at DSP BlackRock Investment Managers Ltd. The other schemes managed by Mr. Lahiri are L&T Emerging Businesses Fund, L&T Equity Fund, L&T India Special Situations Fund, L&T Midcap Fund and L&T Tax Advantage Fund.

He holds a P.G.D.M. in Finance and Marketing from IIM Bangalore. Mr. Lahiri also holds a B.E. degree in Mechanical Engineering.

 

Our View

This is a sectoral fund – hence suitable for investors willing to take on higher risk in their portfolios. It can be more volatile than diversified equity funds. For investors willing to bet on a sector, this can be a good bet.

 
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