Diversified outperformer

Launched in April 2008, Mirae Asset India Opportunities Fund has been ranked CRISIL Fund Rank 1 in the diversified equity category under the CRISIL Mutual Fund Ranking for the quarter ended September 2012. Average assets under management (AUM) of the fund for the quarter ended September were Rs 257 crore. Gopal Agarwal and Neelesh Surana are jointly managing the fund since May 2008. Since its inclusion in the CRISIL Mutual Fund Ranking, the fund has been consistently CRISIL Fund Rank 1 in the Diversified Equity category, barring December 2011, where it was ranked CRISIL Fund Rank 2.

Performance
The fund has delivered superior returns and outperformed both its benchmark (BSE 200) and the category average over one, two and three year time frames, and since its inception. Since inception, the fund posted returns at a compounded annualised growth rate (CAGR) of 13.74 per cent compared to 5.05 per cent and 8.45 per cent by its benchmark and category, respectively. The volatility of the fund is comparable to that of the category. The fund’s outperformance on a risk-adjusted basis is reflected in its Sharpe ratio of 0.44 compared to 0.21 for the category over the past three years. An investment of Rs 1,000 in the fund since its inception would have appreciated to Rs 1,837 as of December 21. An equal amount invested in the benchmark and the category would have yielded Rs 1,262 and Rs 1,467, respectively, during the same period.

A monthly investment of Rs 1,000 under the systematic investment plan (SIP) over three years and since its inception would have grown to Rs 41,943 and Rs 86,542 at a CAGR of 10.33 per cent and 17.83 per cent, respectively. A similar investment in the benchmark would have grown to Rs 39,004 and Rs 71,880 yielding a CAGR of 5.35 per cent and 9.81 per cent, respectively.

The fund has shown consistent performance across market cycles. During the sub-prime crisis from April 2008 to March 2009, the fund declined (-35 per cent) lower than the benchmark (-40 per cent). During the sharp market recovery - post the sub-prime crisis - from April 2009 to December 2010, the fund substantially outperformed the benchmark (73 per cent returns by the fund vs. 56 per cent by the benchmark). In the recent two-year period, from January 2011 till date, the fund gave 2.79 per cent compared to negative returns of the benchmark.

Investment strategy
The fund manager intends to analyse the macro economy, industry trends and business cycles while investing in companies that benefit from macroeconomic, industry and sectoral trends after doing bottom up analysis. The investment strategy of the fund is such that the fund manager may not have any bias towards a particular theme, sector, market cap or style in picking investment opportunities.

Portfolio analysis
Banks have been the most favoured sector over the past three years, with an average 17.3 per cent exposure followed by software, and pharmaceuticals with 9.7 per cent and 7.6 per cent, respectively. Compared to BSE 200, the fund had higher exposure to banks, pharmaceuticals, auto ancillaries and lower exposure to power, oil, and industrial capital goods which have helped it in outperforming the benchmark over the past three years. The representative indices for these sectors – CNX Bank Index, CNX Pharma Index, CNX Auto Index gave a superior annualised return of 12.7 per cent, 16.1 per cent and 16.7 per cent respectively, while BSE Power, CNX Energy Index, BSE Capital goods underperformed with negative 13.2 per cent, negative 4.6 per cent and negative 7.3 per cent respectively, against 4.77 per cent annualised return by BSE 200 during the same period. The fund had an average exposure of 73 per cent to CRISIL defined large cap stocks over the past three years. In December 2009, it had a 56 per cent exposure to large cap stocks which was gradually increased to 82 per cent in January 2012. Over the past year, the fund has been oriented towards large cap stocks with an average 79 per cent exposure.

Some of the stocks retained by the fund over the past three years and which have outperformed BSE 200 are HDFC Bank, Lupin, HDFC, Tata Motors and TCS. The fund is more diversified at the stock level compared to peers. Over the past three years, the fund held an average of 53 stocks with the top five stocks of the fund accounting for 24 per cent of the portfolio against the category which held 45 stocks with the top five stocks constituting 28 per cent of the portfolio.

CRISIL RESEARCH