<div>Satyabrata Mohanty has an unusual designation: head of mixed asset investment. “This was the new designation given to me seven months ago,” Mohanty says with a smile, referring to Birla Sun Life’s effort to bring rigour into the process of fund management for its MIP (monthly income plan) and balanced funds, which involve taking asset allocation calls or deciding the mix of equity and debt in a mixed fund portfolio. The new structure appears to be working well. Birla Sun Life MIP II Savings 5, co-managed by Mohanty and Nishit Dholakia, has topped the charts in the hybrid monthly income category. </div><div> </div><div>MIP as a category of funds is unique as it attempts to make monthly dividend payments to investors by investing in both debt and equity instruments, though it is mandated to invest only 10 per cent in the equity element. This works well in a bearish market and the fund’s NAV takes a smaller battering. The Birla Sun Life MIP II Savings 5 fund has not missed a single dividend since its inception in May 2004.</div><div> </div><div>“We keep a buffer of up to 1-1.5 years of dividend,” says Mohanty. This cushions monthly payments because the payout strategy reserves a part of the returns from the best months for the worst months. In turn, the investor gets regular dividends. At the end of 2009, the fund’s NAV was well above its par value (Rs 10) at Rs 16.35. </div><div> </div><div>The duo managing the fund attributes its success to minimal exposure to equities when the going was bad in 2008. “Around September 2008, we had close to zero exposure to equities,” says Mohanty. “We increased our equity exposure only after February-March 2009 when equity valuations were cheap.”</div><div> </div><div>Currently, Mohanty and Dholakia have parked 3 per cent of their portfolio in equities, which is fairly diversified across sectors: consumer non-durables and banks are the top two sector holdings. “As a rule, we pick stocks that are dividend yielding — at least more than that of Nifty,” says Mohanty.</div><div> </div><div>As of December 2009, money market instruments of IDBI Bank, UCO Bank, ICICI Bank and United Bank of India were among the fund’s top holdings. Almost all the debt assets were parked in the highest-rated securities (sovereign or AAA-rated securities).</div><div> </div><div>Another interesting aspect is that Birla Sun Life MIP II Savings 5 has topped despite grossly under-performing the benchmark Crisil MIP Blended Index last year. It gave a return of just 1.6 per cent as compared to the 13 per cent returns of the index. But over the past three-year period, it has outperformed Crisil’s index, giving an annual return of 12.4 per cent, as compared to the index’s 7.8 per cent.</div><div> </div><div>“We will under-perform [other MIP schemes] in a bullish market and outperform them in a bearish market,” says Mohanty. “Our target is to give the fixed deposit investor an option to earn more. While over the past three years, our fund has given double-digit returns, the challenge is to continue doing so.” </div><div> </div><div>muthukumar dot kailasam at abp dot in</div><div>(This story was published in Businessworld Issue Dated 15-03-2010)</div>