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Aditya Birla Sunlife Equity Fund: A Wealth Multiplier? - Outside View by PersonalFN

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Aditya Birla Sunlife Equity Fund: A Wealth Multiplier?
Jul 19, 2019

Aditya Birla Sunlife Equity Fund is a multi-cap fund having a track record of over two decades. The scheme is mandated to invest across market caps with minimum 65% of its total assets in equity and equity related instruments. However, there is no restriction to any particular market cap.

Multi-cap fund is ideal for people looking for wealth appreciation through the stability of large-caps and the high growth potential of mid and small caps, by undertaking certain level of risk.

Though the scheme has the flexibility to invest across market capitalisation, it prefers to maintain a large-cap bias like most multi-cap funds. However, it maintains the flexibility to invest in mid-caps when needed. This flexibility enables the fund to become cautious and provide the stability of large caps in volatile market periods and turn aggressive by adding exposure to midcaps when this segment becomes attractive.

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The fund is managed by Mr Anil Shah who took over the controls of the scheme in October 2012.

Over longer time periods, ABSL Equity Fund has managed to deliver above-average returns, however its performance in the last one year lagged due to higher exposure it held in mid and small caps.

In this brief analysis, we take a close look at the features and performance of Aditya Birla Sun Life Equity Fund.

Investment objective of Aditya Birla Sunlife Equity Fund

The objective of the scheme is to generate long-term capital growth with a target portfolio allocation of 90% equity and 10% debt and money market securities.

Table 1: Fund Facts Aditya Birla Sun Life Equity Fund

Category Multi cap Funds Style Blend
Type Open ended Market Cap Bias Multi Cap Fund
Launch Date 14-Sep-98 SI Return (CAGR) 22.67%
Corpus (Cr) Rs 11,223 Min./Add. Inv. Rs 100 / Rs 100
Expense Ratio (Dir/Reg) 1.03% / 1.98% Exit Load 1%
Portfolio Data as on June 30, 2019.
SI Return as on July 15, 2019.
(Source: ACE MF)

Under normal circumstances Aditya Birla Sun Life Equity Fund will allocate -

80% - 100% to equity and equity related instruments

0% - 20% to debt and money market instruments

Graph 1: Growth Of Rs 10,000, If Invested In Aditya Birla Sun Life Equity Fund 5 Years Ago


Had you invested Rs 10,000 in ABSL Equity Fund five years back on July 15, 2014, it would have grown to Rs 18,383 as on July 15, 2019. This translates in to a compounded annualised growth rate of 12.95%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark - S&P BSE 200 - TRI index would now be worth Rs 16,762 (a CAGR of 10.88%). As can be seen in the chart above, the multi cap fund has generated a sustainable lead over the benchmark in the last five years and is a promising contender amongst its peers.

Graph 2: Aditya Birla Sunlife Equity Fund: Year-on-Year Performance

Aditya Birla Sunlife Equity Fund: Year-on-Year Performance

ABSL Equity Fund, is among the few schemes that have a track record of over two decades. The year-on-year performance comparison of the fund vis-a-vis its benchmark - S&P BSE 200 - TRI Index shows that the fund has outperformed the benchmark in 5 out of last 10 calendar years. The fund went through a turbulent phase between CY2009 and CY2011, trailing the benchmark by 2-3 percentage points. However, the fund regained its foothold in the following years. Bulk of the alpha was generated in the CY2014 to CY2016. In CY2017, CY2018 and year-to-date, the fund has seemingly run into a rough patch. Its performance trailed the benchmark most in CY2018 as it underperformed by 4.8 percentage points. This can be attributed to the turbulence in mid-cap and small-cap segment.

Table 2: Aditya Birla Sunlife Equity Fund: Performance vis-a-vis category peers

Scheme name Corpus (Cr.) 1-year (%) 2-year (%) 3-year (%) 5-year (%) Std Dev Sharpe
Kotak Standard Multicap Fund 25,845 5.44 12.66 15.75 20.21 12.59 0.18
Principal Multi Cap Growth Fund 887 -1.00 12.20 15.69 18.40 15.03 0.13
JM Multicap Fund 2,005 0.28 10.61 15.56 18.68 14.45 0.16
Aditya Birla SL Equity Fund 11,223 1.09 10.18 15.41 19.97 13.67 0.14
HDFC Equity Fund 23,688 5.34 12.10 14.79 16.83 14.68 0.17
Motilal Oswal Multicap 35 Fund 13,450 -2.55 10.64 14.76 20.02 14.66 0.13
ICICI Pru Multicap Fund 4,002 6.87 10.87 14.02 18.11 12.52 0.11
SBI Magnum Multicap Fund 7,650 1.94 11.26 14.01 20.11 12.79 0.13
Parag Parikh Long Term Equity Fund 1,974 7.36 13.97 13.94 17.36 8.76 0.21
Canara Rob Equity Diver Fund 1,315 7.03 14.04 13.60 14.75 12.50 0.18
DSP Equity Fund 2,647 1.04 10.10 13.11 16.76 15.13 0.13
Quant Active Fund 7 4.06 12.76 12.66 19.99 12.51 0.11
UTI Equity Fund 9,496 7.98 12.67 12.42 15.87 12.98 0.09
Invesco India Multicap Fund 850 -3.14 9.45 12.32 21.17 15.51 0.07
BNP Paribas Multi Cap Fund 745 -2.97 9.41 11.83 17.29 13.78 0.10
HSBC Multi Cap Equity Fund 486 -2.24 8.16 11.75 16.26 15.76 0.04
L&T Equity Fund 2,729 0.24 9.33 11.52 15.59 12.75 0.08
Reliance Multi Cap Fund 10,593 4.45 12.00 11.20 16.56 15.03 0.10
Franklin India Equity Fund 11,318 1.80 9.06 11.07 17.83 12.25 0.05
Union Multi Cap Fund 284 2.78 8.60 9.84 11.12 11.74 0.07
S&P BSE 200 - TRI 5.77 12.75 13.87 14.69 12.46 0.20
Returns are on a rolling basis and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
(Data as on July 15, 2019)
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

ABSL Equity Fund has a solid long-term track record and has distinctly outperformed its benchmark and average category returns in 3-year and 5-year rolling period. It exceeded benchmark returns by 1.5 percentage points in 3-year rolling period and by 5 percentage points in 5-year rolling period. However, it failed to maintain the pace and ended up trailing the benchmark and average category returns over 1-year and 2-year rolling periods.

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Notably, the scheme is among the top 5 performers when compared on 3-year rolling returns basis. The other top funds in the category include Kotak Standard Multi Cap Fund, Principal Multi Cap Growth Fund, JM Multi Cap Fund and HDFC Equity Fund.

On risk-return parameters, ABSL Equity Fund has shown reasonable volatility compared to most schemes in the category and scores well in terms of risk adjusted returns.

Investment Strategy of Aditya Birla Sunlife Equity Fund

ABSL Equity Fund is a multi-cap fund which invests across market capitalisations, sectors and style of investments. The fund adopts top-down and bottom-up approach of investing and lays emphasis on identifying companies with sound corporate management and prospects of good growth.

The fund essentially focuses on stocks driven by long-term fundamentals; however, it also seizes short-term opportunities provided that underlying values support these opportunities. A portion of the assets is also invested in IPOs, emerging sectors, concept stocks and other primary market offerings that meet the fund management team's investment criteria.

Graph 3: Aditya Birla Sunlife Equity Fund Portfolio Allocation and Market Capitalisation Trend

Aditya Birla Sunlife Equity Fund Portfolio Allocation and Market Capitalisation Trend

ABSL Equity Fund's exposure to large cap in the last one year has been in the range of 63-67%. The fund has significant exposure to mid-cap to the tune of 18-20%, while the allocation towards small cap is 7-10%. Cash & debt has been kept lower at 2.5-6.5%. While it has the flexibility to invest across market capitalisation, the fund maintains a large cap bias, though the exposure has narrowed down in the recent past.

Graph 4: Aditya Birla Sunlife Equity Fund Top Portfolio Holdings

Aditya Birla Sunlife Equity Fund Top Portfolio Holdings

ABSL Equity Fund holds a well-diversified portfolio of 71 stocks. The top 10 stocks account for 43.3% of the total holdings and is spread across sectors. ICICI Bank and HDFC Bank lead the stock allocation with an exposure of around 9.5% each. The other stocks in the top 10 holdings of the fund have exposure of around 3% each.

In terms of sectorial holdings, Bank leads the list with a high exposure of 27.9%, with another 7.9% in Finance stocks. This is followed by Consumption with an allocation of 8.9%. Infotech and Pharmaceuticals follow closely behind with an exposure in the range of 7-8%.

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Top contributors

Among the stocks in the portfolio, ICICI Bank contributed the most to the gains in the last 1 year with a portfolio return of around 2.5%. PVR, Bajaj Finance, HDFC Bank, and Dr. Reddys Laboratories contributed in the range of 0.7-0.9% for the portfolio growth. The other top gainers in the portfolio were Titan Company, HCL Technologies, Infosys, Kotak Mahindra Bank and Atul Ltd.

Among the stocks that eroded the portfolio gains, Maruti Suzuki declined the most pulling down the funds return by around 1.2%. Bharat Forge and IndusInd Bank eroded 0.7% and 0.6% of its NAV, respectively. The other top losers in the portfolio were PNB Housing Finance, Castrol India, Dish TV India, Vedanta, IIFL Finance, Tata Steel and ITC.

Suitability of ABSLEF

Being a multi-cap fund, ABSL Equity Fund is mandated to invest across market capitalisation. The fund manager has the flexibility to vary the exposure towards large, mid and small caps based on his perception of the market condition. If the manager expects a market rally, he may increase the allocation towards small and mid-caps, else he will prefer to maintain a large cap bias. Consequently, the risk is diversified, and investors could benefit from higher stability offered by large caps and high return potential of small and mid-caps. This makes the fund suitable for investors with high risk appetite.

The overall performance track record of ABSLEF is encouraging. It has rewarded investors reasonably well over longer time periods by delivering significant alpha over the benchmark and many of its category peers. However, its performance in the 1-year and 2-year rolling periods has been subdued due to volatility in the small and mid-cap segment.

Under the multi cap category, you may find funds with varied investment styles adopting different market cap allocations. Thus, at times it becomes difficult to ascertain the risk-return potential of such funds due to their dynamic nature. A lot depends on the fund manager's experience and skill to derive the returns from multi cap funds.

Before you pick a multi-cap fund for investment, you need to track its performance by comparing it with the benchmark and category peers across time periods and various market cycles. The fund that has consistently performed better than the benchmark and peers can be shortlisted.

Furthermore, the scheme should match your risk profile and should be suitable to meet your investment goals. Thus, before investing, do weigh all options and make a prudent choice.

P.S.: We will soon celebrate 20 years of existence and we are already in the celebratory mode. Under the special anniversary preview offer you have a chance to sign-up for our premium research service 'FundSelect Plus' at a huge discount. Read on to know more.

Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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