 "FUND PICK: Birla Sun Life MIP II-Wealth 25 Plan")
Launched in May 2004, Birla Sun Life MIP II-Wealth 25 Plan is classified under the MIP (monthly income plan) aggressive category of CRISIL Mutual Fund Ranking. The fund has been constantly ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over the past 11 quarters ended June 2016.
The primary objective of the fund is to generate regular income so as to make monthly payments with the secondary objective being growth of capital. The fund is jointly managed by Satyabrata Mohanty, Pranay Sinha and Vineet Maloo. Its quarterly average assets under management stood at Rs 1,070 crore at the end of June 2016 quarter.
Superior performance
The fund has been a consistent outperformer, beating its benchmark (CRISIL MIP Blended Index) and the peer set (schemes defined under the MIP Aggressive category of CRISIL Mutual Fund Ranking June 2016) across all periods under analysis (see chart). Since its inception in May 2004, the fund has given annualised returns of 10.64 per cent compared to the benchmark's 8.31 per cent.
An investment of Rs 1,000 in the fund at the time of its launch would have grown to Rs 3,467 by September 08, 2016 vis-a-vis Rs 3,167 in the peer group and Rs 2,670 in the benchmark.
Had an investor initiated a systematic investment plan (SIP) of Rs 1,000 per month in the fund at inception, the investment amount of Rs 1,49,000 would have grown to Rs 312,642 by September 08, 2016 at 11.38 per cent annualised returns. In comparison, a similar amount invested in the benchmark would have only returned Rs 264,207 at 8.88 per cent.
On average, the fund has maintained higher duration over the past three years to July 2016 compared with the category. The yield moments were well captured by the fund by actively managing its modified duration compared to peers. It increased the modified duration when interest rates were expected to fall and vice versa. Modified duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates.
For instance, when interest rates were on down trend, the fund increased its modified duration to 8.22 years in January 2016 (vs the category's modified duration of 4.97 years for the same month) from 2.24 years in August 2013. During the same period, 5 to 6 year G-sec softened from 9.42 per cent in August 2013 to 7.86 per cent in January 2016. The timely duration management has helped the fund deliver better returns than the benchmark and the category during the considered timeframe.
Portfolio analysis
Over the past 3 years (as of July 2016), the fund's investment in equity was higher at 29.36 per cent than peers' average of 21.85 per cent. The debt portfolio is well protected in terms of credit risk as a result of investments in the highest-rated debt papers (AAA/P1+) and government securities. During the past three years, on average, 88 per cent of the debt portfolio is invested in these papers and remaining in below AAA papers (include A/AA papers).
Over this period, the fund has maintained high exposure to sovereign securities and low to corporate debt compared with the category.
