Good bet for an unfavourable market

It’s difficult not to like this fu­nd. Ever since 2003, it has beaten the category average every ye­ar. Its charm lies in the fact that it has impressed during, both, favourable and unfavourable m­arket conditions.
The fund’s performance in 2007 was impressive at 70 per cent (category average: 59 per cent). A high mid- and small-cap exposure along with considerab­le allocation to energy helped. Wh­at’s even more impressive is that fund manager Apoorva Sh­ah managed this return despite being heavy on technology. In the crash that followed, he resorted to defensives and cash, though not abnormally high.
Ever since June 2006, its performance in declining quarters has improved considerably. In the bear phase spanning Janua­ry 8, 2008 to March 9, 2009, it sh­­ed 49.5 per cent (category average: 55 per cent). But when the market began to rise in Ma­r­ch 2009, Shah was not very qu­ick in lowering his cash allocati­on and did so mainly in May. “We were caught unaware by the sh­arp rise,” he admits. Neither did he go heavy on constructi­on, metals or financials, which bo­omed during that time. “We felt that the risk was not justified at this time,” says Shah. As a resu­lt, the fund delivered 79 per cent (category average: 89 p­er cent) when the market rallied from March 9 to August 31.
Right now he is focussing on oil and gas downstream and top qu­ality IT Services. He is also positive on auto and consumer stocks. In real estate, Shah is fo­cussing on “companies that ha­ve been able to raise funds wh­ich have helped them de-leverage, improve their balance sheet and launched new projects at cheaper prices and got rid of their inventory of land.”
If erring on the side of caution is typical of Shah’s style, so is his rigorous diversification. Ex-posure to the top 10 ho­­ldings is generally capped at 35 per cent and allocation to the top three sectors remains below the category average. The fund does take short-term bets (nearly 40 per cent of the stocks are he­ld for less than 6 months) and in the lo­ng-term hol-dings, intermittent profit b­o­oking does take place.
—Value Research