A compounded annualised return of less than 3per cent since inception in March 2006 does not augur well for investors holding Kotak Lifestyle Fund in their portfolio. The fund’s unimpressive performance compared with its benchmark, CNX 500, over different time periods since inception warrants a re-look from investors to possibly switch to some of the top-performing diversified large-cap funds such as HDFC Top 200 and DSPBR Top 100 Equity.
The fund was launched with a view that it would benefit from an upward economic cycle with the consumerism expanding substantially. But the timing may have been a tad late. The fund’s investment objective is to invest across companies that are likely to benefit from changing lifestyle and rising consumerism.
Performance: The fund, since inception, has failed to contain losses during market correction and has limited participation during market rallies as well. Having been fully invested for at least two-thirds of 2008, Kotak Lifestyle bore the brunt of market corrections. Moving one-fourth of its assets to cash in the latter part of that year did not help.Similarly, during the recovery in 2009, despite moving its assets into equity, the fund failed to participate fully in the market rally. Over a one-year period, the fund has clocked an absolute return of 66 per cent and has trailed the CNX 500 by 22 percentage points. Kotak Lifestyle’s under-performance can be attributed to its sector selection.
When the valuation of software and pharma was compelling in the early part of 2009 both these sectors failed to find a place in the portfolio. The fund has the propensity to take concentrated calls on some sectors , which increases its risk profile. Over a three-year period, its NAV returns trailed its benchmark’s by 10 percentage points.
Portfolio Overview: The fund’s December portfolio shows that the top three preferred sectors were banks, consumer non-durables and auto, accounting for more than 50 per cent of the assets. Among the Kotak funds, Lifestyle has lower portfolio turnover and it implies that the fund, by and large, prefers to adopt a buy and hold strategy. The stocks in the latest portfolio have a tilt towards large-cap stocks.. HBL