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Copycat portfolios - Views on News from Equitymaster
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  • Jun 30, 2000

    Copycat portfolios

    Some fund houses have the penchant for mirroring their investment decisions across two different schemes. The result - two distinct portfolios with the same stocks.

    Mutual funds leverage their research on stocks across their schemes. With this they ensure that research costs for each scheme is low, as they spread their costs across various schemes. However, the result of this leveraging can be quite a revelation to investors.

    Alliance Equity Fund (Growth Scheme)
    Company   % of Net Assets
    Infosys  12.80%
    Satyam Computer  10.70%
    HFCL  9.60%
    Global Tele  5.90%
    Zee Telefilms  5.90%
    SSI  5.80%
    HDFC Bank  4.40%
    HCL Tech.  4.20%
    Digital Equipment  3.50%
    Dr. Reddy's  2.10%
    (as on 31 May 2000)
    Alliance 1995 Fund (Balanced Scheme)
    Company   % of Net Assets
    Infosys  8.80%
    Satyam Computer  7.90%
    HFCL  5.40%
    HDFC Bank  4.20%
    SSI  3.70%
    Zee Telefilms  3.60%
    Global Tele  3.40%
    Mascon Global Ltd.  3.30%
    Digital Equipment  3.00%
    (as on 31 May 2000)

    Is it the same scheme or is it the same scheme? It’s not the same scheme, however, the portfolios are the same. Well almost. There are as many as 8 companies that are common across both the schemes, that too only in the top 10. Very little innovative fund management here!

    Lets see how mirror portfolios benefit both the schemes. In times of a rising market, both these schemes will do well to the extent that the stocks are the same. And in a falling market – you guessed it, both will sink to that extent.

    Investors have to keep this in mind before they invest in a particular fund house. If an investor has already invested in a balanced fund, say Alliance 1995 Fund and now wants to invest in a growth fund, he must see if he can invest in a different fund house altogether. By investing in Alliance’s growth fund (i.e. Alliance Equity Fund) he will be taking exposure to the same stocks and sectors (as his balanced fund), which will skew his risk profile considerably.



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