What’s in: infra, short-term bond funds

The start of the year is usually a good time to take stock of your portfolio, to check which of your investments did not do well and whether you need to remove any or add some. If you are thinking in terms of funds, check out what’s in and what’s out.

india Updated: Jan 28, 2012 01:39 IST
Hindustan Times

AIG India Infra and Economic Reform Fund

The fund has been working hard at improving its performance over the past three years, bouncing up from just matching the benchmark it tracks three years ago to outperforming it by 4 percentage points over the past year. Apart from investing in infrastructure related sectors and having significant exposure to small- and mid-cap stocks, it invests in sectors that benefit from economic reforms; the latter allows AIE to invest in the banking sector. “Under the theme of economic reforms, we try to look for opportunities where the companies will benefit due to reforms undertaken to reduce fiscal deficit,” said fund manager Huzaifa Husain, explaining the exposure to banking stocks.

Canara Robeco Infra Fund

Good performance and staying true to its label are reasons we pick CRI. Fund manager Soumendra Nath Lahiri has experience running infrastructure funds; he managed DSP BlackRock India TIGER Fund (The Infrastructure Growth and Economic Reforms Fund) since its inception in January 2005 till March 2008 and returned a compounded annual growth rate of 40.7% compared with 27% by diversified funds. After Lahiri took over CRI in March 2011, he reduced the scheme’s exposure to banking — sold banking stocks, including ICICI Bank Ltd and Punjab National Bank — and added stocks of equipment providers, including Bharat Electronics and Texmaco Rail and Engineering Ltd. The fund’s exposure to the cement sector paid off well last year.

AIG India Short-Term Fund https://www.hindustantimes.com/Images/HTEditImages/Images/28_01_buss06.jpghttps://www.hindustantimes.com/Images/HTEditImages/Images/28_01_buss07.jpg

With returns of 9.51% last year, ASF has been one of the best performers in the category. Fund manager Vikrant Mehta’s priority is to maintain liquidity. So ASF sticks to high-quality scrips, especially certificate of deposits, or CDs, (short-term papers issued by banks). “CDs are among the most creditworthy and tradable instruments in the fixed-income market,” said Mehta. “Other than CDs, we continue to take in phases exposure to commercial paper (CPs), corporate bonds and government securities. However, as the fund’s current emphasis is on both credit quality and tradability, the investment universe considerably narrows down to select entities in the public and private sector.”

Canara Robeco Short-Term Fund

With returns of 9.18% last year, this is a consistent performer. The fund holds high-quality debt papers and takes measured exposure in corporate papers that come with a high credit rating and liquidity. It invests 30% to 45% in CDs and the rest in corporate papers. But Ritesh Jain, head (investments), Canara Robeco Asset Management, isn’t much worried about the scheme’s small corpus. “The corpus is smaller compared with some peers but as of now it is at a decent size,” said Jain. “Generally, the risk on portfolio size comes from illiquidity, credit and concentration. Our short-term fund’s portfolio has high credit quality, very liquid papers and the concentration risk is very low.”

HDFC Balanced Fund (HBL)

Hidden in the shadows of its elder peer, HDFC Prudence Fund (HPF), this scheme is carving a niche for itself. The two mutual funds are actually quite different. First, both the funds are managed by two different fund managers. While Prashant Jain manages HPF, Chirag Setalvad manages HBF. Second, HPF invests 70-75% of its corpus in equities at all times, while HBL invests between 65% and 69% in equities.

Third, while Jain invests significantly in large-cap companies, Setalvad leans more towards mid-caps. “Our smaller corpus gives us greater flexibility to invest in mid-caps as the scheme is nimble-footed,” said Setalvad. While HPF has returned 28% in the last three years, HBL has returned 27%.

Franklin India Index Fund

Our sixth spot goes to an index fund. If you don’t already have a demat account, we suggest that you go for an index funds instead, in case you are interested in passively managed funds. With a corpus of Rs 139 crore, this is one of the largest index funds in India. It tracks the Nifty and comes at a low cost of just 1%; index funds can charge a maximum of 1.5%. Its tracking error (difference between its returns and that of its benchmark index; Nifty) is one of the lowest at 0.3, according to Value Research.

IDBI Nifty Junior Fund

Up till today, we had only one option — Benchmark Nifty Junior BeES (BNJ), an ETF — that allowed you to invest in Nifty Junior index. Nifty Junior index consists of 50 scrips that are the next set of 50 most liquid stocks after the 50 Nifty stocks. These are companies that experts believe are next in line to crack into the Nifty index; a move that gives a push to their share prices. But since BNJ is an ETF scheme, it can be bought only on stock exchanges and, therefore, require a demat account, we add an index fund tracking Nifty Junior index. Of the two index funds that track Nifty Junior, INJ comes with a lower tracking error.

First Published: Jan 27, 2012 21:24 IST