Product Review: Reliance Top 200 Fund Reliance Top 200 Fund was launched in August 2007, amidst ominously high valuations and hushed talk of an impending stock market bubble. The pure carnage that followed a few months later has already been amply discussed, debated and dissected - and therefore needs no further examination.
The unfortunately timed launch has led to the fund displaying a 'since inception' return of just 10.95 per cent per annum; this definitely does no justice to what actually is a high quality, well managed equity fund that is highly recommended for all risk loving investors with a time horizon of five to seven years.
Performance
In the past three years, the fund has returned a handsome 24.18% per annum, with the five-year annualized return proudly clocking 18.19%. In terms of five-year performance, Reliance Top 200 is positioned fifth among close to 70 competing funds.
The fund has outperformed its benchmark (the BSE Top 200 index) by nearly 7 per cent per annum over the past three years. Needless to say, Reliance Top 200 is a high Alpha Fund (8.49 versus a category average of 3.43).
As with most other funds in its category, the portfolio remains heavily skewed towards Financial stocks (over 30%).
Fund Management StrategyReliance Top 200 Fund has been managed directly by stalwart Fund Manager Sailesh Bhan (Deputy CIO - Equity) since its inception in August 2007. Bhan has over 21 years of experience in Equity Research & Fund Management and is a Reliance Nippon Life AMC veteran, having been with the company for over the 13 years.
Bhan currently manages assets close to USD 2.5 billion across open & close ended equity schemes. Apart from Reliance Top 200, he also manages Reliance Equity Opportunities Fund (since 2005), Reliance Pharma Fund (since 2004) and Reliance Media & Entertainment Fund (Since 2004).
Buying Growth at Reasonable ValuationsIf one was to sum up the investment philosophy of Reliance Top 200 in one line, it would read as "Buying Growth at Reasonable Valuations". The fund's focus is on identifying growth opportunities at reasonable valuations, and relative cross sector valuation is an important tool to decide portfolio allocations.
The fund also makes a significant quantum of sector calls based on "cross sectoral value divergence ". Allocations to potentially high growth midcaps with leadership qualities & sustainable competitive advantages, are the key alpha generation strategies adopted by the fund.
Reliance Top 200 prides itself in being 'forward thinking' in terms of its ability to identify future trends, and in its innate ability to stay ahead of large market shifts in order to capture sustainable alpha. In the recent past, exposures to themes like Oil & Gas, Hospitality and Banking segments have played out very well and contributed positively to the fund's returns. Some of these sectors were not in limelight till few quarters back.
Reliance Top 200 sticks to its core philosophy resolutely. The year 2013 is a case in point, during which time markets were highly distorted with cross sector valuations gaps reaching extreme levels. The fund stuck to the philosophy of 'not overpaying for growth' and focusing on valuations in highly volatile times, which paid off richly over the next few quarters.
Risk Controls & StructureThe Fund invests 70-80 per cent of its corpus in large cap companies or market leaders with well-established track record across market cycles. Even the mid-cap exposure is made in companies that are market leaders in their respective segments with sustainable long term advantages.
The fund is well diversified across sectors. The allocation to an individual scrip usually does not exceed 5 per cent - 7 per cent of the portfolio at the time of investing. In case of Mid Cap stocks, the allocation is usually not more than 3 % - 4% of the portfolio at the time of investing. Further the portfolio is monitored constantly to ascertain sensitivity to macro variables by classifying the industries into 1) Cyclicals, 2) Semi-Cyclicals and 3) Structural industries. This allows for better risk assessment and management.
Play for the next 12-24 monthsReliance Top 200 is focused on domestic recovery themes and growth opportunities, with a focus on good quality businesses supported by higher growth possibilities. According to inputs received from the Fund Management Team, the focus will remain on 'relative valuations versus above market earnings growth prospects' over the next 12 months.
The Bottom LineWith its core philosophy of 'buying businesses, not prices', Reliance Top 200 doesn't warrant timed entries or short term investments. The Fund is strictly suitable for individuals with high risk appetites and time horizons exceeding five to seven years. Given that valuations aren't exactly cheap as on date, it would be prudent to Invest in this fund through a monthly SIP, or through a 12-18 month STP (Systematic Transfer Plan) followed by a five year holding period. It may be best to avoid making large ticket lump sum entries into the fund at this time. Having said that, deep market cuts in the coming months (if any) may be used as buying opportunities into this fund.
This product was reviewed on 10 October 2016
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