MF winners in a dull year

Six schemes had at least 20% return over the past year, despite sharp corrections and steep volatility in the markets

The slump in the markets this year has hit several mutual fund (MF) equity schemes. The benchmark indices, after gaining 10 per cent, have erased all their gains and are currently in negative territory in terms of year to date returns. The average returns on equity schemes offered by MF houses have been flat or negative for the past year.

However, about half a dozen have done exceedingly well, with at least 20 per cent return over the past year.  They've beaten peers in other categories of funds and outperformed their own benchmarks by a big margin. A bottom-up stock picking approach while valuations remained reasonable, running concentrated portfolios and buying stocks outside the respective benchmarks helped these funds to outperform.

Two schemes from SBI MF, the country's sixth largest fund house, its Small & Midcap Fund and Magnum Midcap Fund, have made it to this list. They gained 30.4 per cent and 21.6 per cent, respectively.

Says R Srinivasan, head (equity) at SBI MF: “Performance down the capitalisation curve has been better in the past one year. Further, we are benchmark agnostic and given the diversity of the mid-cap and small-cap space, the portfolio is not a fair representative of the small-cap benchmark.”

The include Motilal Oswal AMC's Midcap 30 Fund and Multicap 35 Fund and the JPMorgan India Mid & Small Cap Fund. These funds have given returns between 21 per cent and 29 per cent.

Taher Badshah, fund manager at Motilal Oswal AMC, says: “These funds have been driven entirely by our strategy of constructing bottom-up portfolios, by selecting a handful of companies demonstrating enough business and management quality, medium-term growth prospects and available at reasonable valuations. Both (our) funds have been run as concentrated 18-20 stock portfolios and have significant active components (non-benchmark stocks), with less than 25 per cent overlap with their respective benchmarks. Such a combination of our strategy and high-conviction, low churn portfolio constructs has resulted in superior alpha generation.”

Among these, the only fund in the micro-cap category is DSP BlackRock Micro Cap Fund. The fund gained nearly 25 per cent in the past year, the fourth highest money making scheme for investors.

Vinit Sambre, vice-president at DSP BlackRock MF, has been managing the micro-cap fund since

June 2010. According to him, “The pure fundamental approach for stock selection we have been following works well. We follow a buy and hold strategy, while also looking at some cyclical businesses which are at the cusp of turnaround. If we are able to identify these companies ahead of the curve, it leads to superior performance.”

Apart from these top money makers, 13 equity schemes gained between 15 and 20 per cent in the past one year. These include Kotak Emerging Equity Scheme (18.5 per cent), Escorts Leading Sectors Fund (18.3 per cent), Birla Sun Life Mid Cap Fund (18 per cent) and Tata Midcap Growth Fund (17.6 per cent), among others.