Birla Sun Life Pure Value Fund

AUM Rs.261.4 CRORE ................................................. AS ON SEPT 30, 2014
NAV Rs.33.54................................................................... AS ON OCT 13, 2014

Usually when the equity markets witness a decline investors get nervous as the investment value begins to shrink. And hence in such a scenario most of the investors either stay away from the markets or at least trade cautiously. However there are some who actually take it as an opportunity and create immense wealth.

Birla Sun Life Pure Value Fund is such an example which has created great returns for investors by harvesting in difficult times. It was launched in the troubled period of 2008 when global recession had played havoc and equity indices globally were only moving southwards. The objective behind this launch in March 2008 was to find stocks which were trading below their intrinsic value. And if the returns for the past five years or even since inception are anything to go by, the fund has really created good amount of wealth for its investors.

The fund has managed to beat its category returns on a one-year basis by 1841 points and on a three-year and five-year basis by 248 and 247 points respectively. Further, for an investor who had opted for SIP in the past three years, Rs 36,000 would have grown to Rs 66,499.30. As regards the policy of investment, the scheme seeks to generate consistent long-term capital appreciation by investing predominantly in equity and equity-related securities by following value investment strategy i.e. buying into stocks that are trading for less than their intrinsic value - stocks that the market is undervaluing. In simple terms, the fund follows the remarkable theory of value investing.

We are of the opinion that fortunes are made in the markets by buying a stock at the right value and with a good margin of safety. If we take a look at the fund’s risk analysis, its beta stands at 1.05 while alpha is 9.40. The Sharpe ratio stands at 0.84. These figures provide a good amount of solace to investors.

On the portfolio front, it has exposure to the financials sector to the tune of 26.55 per cent followed by construction (10.32 per cent), automobile (9.71 per cent), technology (9.28 per cent) and chemicals (8.95 per cent). While we have some discomfort about more than a quarter of the portfolio invested in financials, we are bullish on the other bets like technology and construction. While technology is expected to benefit from the depreciating rupee, the revival in capex may turn the fortunes of the construction sector. The fund’s stock selection has also been good as it grabbed the opportunity that HCL Tech presented at the right time. We are also positive about its other selections such as ICICI Bank, Omkar Speciality Chemicals and MRF.

There might be some worry about a new fund manager, Mahesh Patil, taking over from January 2014. But the strong performance in Q1 (up 16.12 per cent) and Q2 (up 51.39 per cent) indicate the ability of the fund manager to generate alpha for the investors. We recommend our readers to have exposure to Birla Sun Life Pure Value Fund with a perspective of more than three years.