Monday, June 1, 2009


Equity returns minus the volatility

Focus is on Delivering Low Volatility Equity Returns

Equity Market Linked Returns tend to be very volatile and bumpy, yet its Long Term Returns are too attractive to ignore it. For investors, Greed and Fear play a huge role in determing their returns. Fear prevents from Buying at lower levels and Greed prevents from Booking Profit at High/Unreasonable levels.

This dilemma is what Birla sunlife Freedom Fund tries to solve.

Birla Sunlife Freedom Fund aims to
1) Buy, Hold and Sell Equity from time to time.
2) Follow a Rule Based Investment Process and thus increase/decrease equity exposure according to Market behaviour.
3) Will focus on investing in Sectors based on Lead Economic Indicators.
4) The fund will invest in Equity upto maximum limit of 75% and the balance in Actively managed Debt.

Birla Sunlife Freedom Fund will take a call on its Net Equity Exposure based on Value, Momentum and Volatility.
Value : Is the markets priced correctly ; is the PE cheap or attractive??
Momentum : Sentiment and Direction of the Market
Volatility : Level of the Uncertainty in the Market
Stock Selection will be based on identification of Sectors set for Take off and expected to do well.
Back Testing Results of the Fund compared with Nifty has shown the Fund giving a return of 17.85% CAGR compared with the Nifty CAGR return of 14.17%. The Testing is for the Period from Jan 01, 1999 to April 15, 2009.

1) Emotional Decisions are replaced by Systematic Strategy
2) Flexibility to Reduce Equity Exposure through Index Shorts would protect downside and thus give potentially higher returns though with Higher volatility.
3) Treated as an Equity Fund for Tax Purposes.
4) Fund's focus to invest in Companies with Low PEs will trim negative returns in a Falling Market.

1) Over Long Term, due to its Balanced Nature and flexible nature of reducing equity exposure to zero, this Fund WILL give lesser returns than Conventional Equity Funds.

Minimum Investment : Rs.5000
Benchmark : Crisil Balanced Fund Index
SIP/STP available

The Fund has the capability to Generate Equity Returns minus the accompanying Volatility. Back Testing of the Model too gives sufficient comfort. 25% investment in Debt too gives cushion and the provision to short the Index Futures should take out the 'Risk' out of the Fund.
In the recent Downturn, the Fund had a fall of just 12% compared to its peer of 26.7%.
Over a Five Year Period too, the Company's return of 17.68% does provide comfort.

But do keep an eye and review the performance of the fund after 1 year or so.
Also visit for an indepth Equity Analysis

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