Monday, August 8, 2011

AIG India Equity Fund

since the market started recovering post 2008, AIG India Equity Fund has been an option for aggressive investors, continuously investing in high beta companies. The Fund has been outperforming its benchmark index, but only for the short term.

Looking at the overall situation and the long term performance, the fund has not delivered consistently for its investors. Arnav Pandya analyses the fund and tells you if you should consider this for you portfolio.

AIG India Equity Fund

Nature : Equity oriented open ended
Launch : May 2007
Assets under management: ( As of 30 June 2011) Rs 164 crore
Fund manager : Huzaifa Husain


• At the end of January 2009 as the equity markets were slowly finding some stability after the battering due to the world economic crisis the fund puts its faith into consumer non durables and banks as the sector with the exposure to these areas at around 12.8 per cent each. This was followed by industrial capital goods and petroleum products. ITC was the top holding followed by Reliance Industries, HDFC, Colgate Palmolive and SBI. The top holding exposure was just above 7 per cent and at this point of time the fund had nearly 13 per cent of its assets in cash as it was seeking good investment opportunities. It was also underperforming its benchmark BSE 100 over the last one year and since its inception.

• By the end of June the fund made a clear change in its outlook with it relying on banks to provide impetus to the fund with an exposure at over 18 per cent. This was followed by industrial capital goods and the consumer non durables had slid to the third spot. Cement was climbing up on the exposure charts with the sector exposure at 8 per cent and Shree Cements was the top company in the fund with holding of 7 per cent. Bharti, SBI, Container Corporation and Hero Honda were the other top holdings and the fund managed to gain outperformance over the one year time frame.

• The steady change in the top holdings of the fund continued and at the end of December 2009 industrial capital goods were the top sector followed by auto and banks. Shree Cement had slid from the top holding to the seventh spot and Hero Honda had the highest individual exposure followed by Jindal Steel and Power, AIA Engg, Container Corporation and GVK Power and Infrastructure. The fund had also become a bit more aggressive with the top holdings having an exposure of more than 8 per cent. The fund continued its short term outperformance over 1 year with this strategy but was still unable to pull back the long term deficit.

• Six months later auto was at the top of the exposure charts followed by industrial capital goods and software. In terms of the top holdings Hero Honda remained at number one but Shree Cement was back to the number two spot. The other top spots were with Container Corp, Maruti Suzuki and Bajaj Auto. All this action was improving the one year performance where the outperformance over the benchmark was around 14 per cent but it was still underperformance for the three years and above time period.

• The fund has taken a moderate approach since then with the holdings more diversified than before in the portfolio. The exposure to the top stocks has also gone down in percentage terms as against what was witnessed earlier. Among the top holdings were Infosys, Dr Reddys, Bajaj Auto, Sun TV and Hero Honda. Auto, pharma and software were the top three sectors but this strategy did not do much to remove the underperformance. In fact the fund was now underperforming its benchmark across all time periods.

• At the end of June 2011 Six months later the portfolio position was nearly the same with minor changes being visible. Auto, pharma, banks and software were the top sectors in terms of holdings. Further the stocks with the highest exposure were Infosys, Hero Honda, HDFC Bank, Jindal Steel & Power and Dr Reddys. The fund was underperforming on the one year time frame but outperforming on the 3 year time period.

• Looking at the overall situation and the long term performance the fund has not delivered consistently for its investors. Keeping this in mind long term investors looking for stability can keep away from the fund. Those who are looking to take an aggressive view in the short term and expect good performance from the existing portfolio can consider the fund as a choice in their list.