Apr 13, 2008

Mutual Funds - DBS Chola Opportunities Fund Analysis


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The aggressive investor can consider investment in DBS Chola Opportunities Fund. After a sedate performance three years ago, and trailing the category average for two consecutive years, the fund has come a long way. In the past three years, it has stepped up its performance, outpaced the benchmark and category average by a good margin

Due to improved performance, the fund's asset under management has grown substantially during the past one year. From hardly Rs 10 crore, the asset size has grown, and, especially in the last quarter, surged to Rs 72 crore.

A small asset size holds out both advantages and disadvantages. In a choppy market, the fund has the flexibility to churn its portfolio at a faster pace compared to bigger players, thereby the fund can contain the loss better. The disadvantage is that due to low asset base, the fund will find it difficult to allocate the asset across all the performing sectors.

But DBS Chola has handled the task better over the past two years by actively changing the portfolio. On an average, not less than 15 new stocks found their way into the portfolio every month. Given the aggressive play, the fund may skip a bull rally like the one witnessed in the past few years prior to the ongoing correction. Hence, an investor who prefers to time his market moves and is willing to take a risk-reward trade-off can consider investing in this fund.

Performance: The fund's NAV has grown by 43 per cent and outpaced the benchmark by 22 percentage points and the broader index CNX 500 by 23 percentage points. The fund, over the quarters, has changed the investment pattern from a large-cap bias to more of a flexi cap strategy. The fund, despite allocating close to 45 per cent of the assets to mid and small-cap stocks, has contained the loss during the ongoing correction.

Portfolio overview: The fund has a well-spread portfolio and consists of 35 stocks in 27 sectors. Even the large cap stocks have not been held for more than six months.

However, there are some exemptions in the mid-cap segment. In sector allocation, the fund moved out of capital goods prior to correction. It has utilised the deeper correction in the construction space to accumulate stocks for the past one month.