Reliance Equity Opportunities Fund

AUM Rs 6162.2 CRORE................................................................................ AS ON JUNE 30, 2014

NAV Rs 61.74........................................................................................ AS ON AUG 19, 2014

Reliance Equity Opportunities Fund has always maintained a balance as far as the portfolio allocation is concerned. It has maintained a near perfect balance of large and mid-cap stocks in its portfolio. The fund first came into limelight in 2009 when it beat the category average by 25 per cent, after consecutive years of below par performance. It has been outperforming most of its peers since then and even managed to curtail its losses better in the market crisis of 2011. The fund is compliant enough to change its market capitalization according to the prevailing environment and profitably rotating its portfolio across sectors.

With an asset under management (AUM) of Rs 6162 crore, the corpus of the fund has grown at a CAGR of 14 per cent in the last eight years. A SIP of Rs 1000 for the last three years will have resulted into a fund value of Rs 54600. The fund is managed by Sailesh Raj Bhan (since 2005) and Viral Berawala (since September 2010).

The scheme aims to invest in stocks across those sectors and industries which drive the country’s growth and are influenced by the ongoing economic reforms and infrastructural changes. As per the fund manager, the fund tries to take thematic bets, of which some are very offb eat and non-benchmark related. Th e fund generally doesn’t hold more than 10 per cent in cash. At present the large cap consists 34 per cent of the total holding while the rest 66 per cent is held in mid and small-cap stocks. In its eight-year history, the fund’s portfolio emphasis has changed several times; from large and mid-cap to multi-cap to now mid and small-cap. Its top winners include HCL Technologies, SBI, Cummins India, Aurobindo Pharma, Jindal Saw, Shopper’s Stop, Hathway Cable and Datacom, Sanofi India and Divis Laboratories (highest allocation of 5.57 per cent). Surprisingly, the fund is not gung-ho about the FMCG theme and has just three per cent allocated to it for the past four years and is instead overweight on healthcare and services, benchmark-wise. The dominant sectors of the fund include financial (18.83 per cent), Engineering (15.72 per cent), services (13.88 per cent), healthcare (12.04 per cent) and technology (10.50 per cent).

The fund manager has short list of 56 stocks generally consisting of stocks that could surprise on earnings, those that have proven earnings growth better than their sectors, and proven core stocks with superior earnings. The fund follows a stock-centric approach rather than a top down sector-centric or macro-driven approach.

The improved performance of the fund speaks for itself. The sharp ratio stands at 0.57. The alpha of the fund stands at 3.68, which represents the excess return that the fund has generated at a given level of risk.

The fund could be an ideal candidate for inclusion in the mutual fund portfolios of both risk-taking as well as risk-averse investors. The fund ticks all the right boxes with steady returns, consistent management and flexibility to invest across sectors and market cap. Hence a SIP route in the fund can be looked at by investors in the long term.