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Launched in May 2004, Birla Sun Life MIP II - Wealth 25 Plan is classified under the monthly income plan (MIP) aggressive category of CRISIL Mutual FundRanking. The fund has been constantly ranked in the top 30 percentile (CRISILFund Rank 1 or 2) in the past 12 quarters ended March 2017.
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.
Superior performance
The fund has consistently outpaced its benchmark (CRISIL MIP Blended Index) and the category (schemes defined under the MIP aggressive category of CRISIL Mutual Fund Ranking) in all periods under analysis. In the past one year, the fund delivered 19.30 per cent absolute returns compared to the benchmark’s 12.24 per cent and the category’s 13.29 per cent, beating the benchmarks by a significant margin.
An investment of Rs 1,000 in the fund at the time of its launch would have grown to Rs 3,722 (10.60 per cent annual returns), substantially higher than the benchmark’s Rs 2,854 at 8.37 per cent and the category’s Rs 3,129 at 9.14 per cent.
A systematic investment plan (SIP) of Rs 1,000 per month in the fund at inception which translates to an investment amount of Rs 1,58,000, would have grown to Rs 3,48,105 by June 5, 2017 translating to annualised returns of 11.39 per cent. In comparison, a similar amount invested in the benchmark would have returned Rs 2,90,555 at 8.88 per cent.
On average, the fund has maintained higher duration in the past three years to April 2017 compared with the category.
It has actively managed duration across market cycles to capture yield movements compared to peers. It increased the modified duration when interest rates were expected to fall and vice versa.
For instance, when interest rates trended down, the fund increased its modified duration to 8.22 years in January 2016 (vs the category's modified duration of 5.15 years for the same month) from 5.12 years in May 2014. During the same period, yield of government securities (G-secs) of five to six year maturity softened from 9.18 per cent in May 2014 to 7.84 per cent in January 2016.
Timely duration management has helped the fund consistently outperform the benchmark and the category during the considered timeframe.
Portfolio analysis
In the past three years (as of April 2017), the fund's investment in equity was higher at 29.34 per cent compared to the category's 22.13 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. In the past three years, on average, 91 per cent of the debt portfolio was invested in these papers and the remaining in below AAA papers (including A/AA papers). During this period, the fund has maintained high exposure to sovereign securities and low to corporate debt compared with the category.
CRISIL Research
