Birla Sun Life Frontline Equity Fund: The most consistent Large Cap fund

2017 has begun on a very promising note for Indian equities, especially large cap stocks and mutual funds. The Nifty is already up nearly 9% in the first two months. Birla Sun Life Frontline Equity Fund, one of the best performing large cap funds over the last several years, has already given 9.3% returns year to date in 2017. While a few large cap funds have delivered similar returns, what stands out for Birla Sun Life Frontline Equity Fund is its amazing performance consistency.

In the last 5 years, the fund has always been in the top 2 quartiles and it has been in the top quartile in the last 4 years out of 5. As per our Top Consistent Mutual Fund Performers research tool, Birla Sun Life Frontline Equity Fund is the most consistent performer in the last 5 years (2012 – 2016). Even this year (2017), the fund is in the top quartile on an YTD basis. Average annual return of Birla Sun Life Frontline Equity Fund over the past 5 years is over 19% (the chart below shows the annual returns of the fund since 2012).

Source: Advisorkhoj Research

Morningstar has a 5 star rating for this fund.

Fund Overview

Birla Sun Life Frontline Equity Fund was launched in 2002 and has Rs 14,800 Crores of Assets under Management (AUM). The expense ratio of the fund is 2.25%. The fund has given 22% annualized returns since inception. The fund is helmed by well known fund manager Mahesh Patil. The chart below shows the NAV growth of Birla Sun Life Frontline Equity Fund since inception.

Source: Advisorkhoj Research

The chart below shows 3 year rolling returns of Birla Sun Life Frontline Equity Fund over the last 10 years. We chose a 3 year rolling returns period because investors should have a long investment horizon when investing in equity funds.

Source: Advisorkhoj Rolling Returns

You can see that, the fund has consistently outperformed the benchmark in the last 10 years. The out performance gap versus the benchmark has been fairly stable, which shows prudent risk management. 3 year rolling return of the fund was never negative in the last 10 years; the minimum 3 year rolling returns was 1.2%. The maximum three year rolling returns was 31%.

Portfolio Construction

The fund has a bias for large cap growth oriented stocks. Large cap stocks account for nearly 90% of the portfolio value. In terms of sector allocation, the portfolio has a bias towards cyclical sectors like Banking and Finance, Automobiles,Oil and Gas etc. To balance the exposure to cyclical sectors, the fund also has significant allocations to defensive sectors like Technology, FMCG and Pharmaceuticals which comprise about 23% of the portfolio value. With cyclical sectors poised to do well with the revival in economic growth and capex cycle, the Birla Sun Life Frontline Equity Fund is positioned strongly in thecoming years.In terms of company concentration the fund is fairly well diversified, the top 5 companies, HDFC Bank, Infosys, ITC, ICICI Bank and Tata Motors, all Sensex heavyweights, accounts for only 22% of the portfolio value.

Source: Advisorkhoj Research

Wealth Creation Track Record

The chart below shows the growth of Rs 1 lakh investment in NFO of Birla Sun Life Frontline Equity Fund (Growth Option) since inception.

Source: Advisorkhoj Research

Rs 1 lakh invested in the NFO of the fund would have multiplied 10 times in less than 9 years and by now (Mar 1, 2017) would have grown to Rs 17 Lakhs. Investment CAGR since inception is more 22%.

The chart below shows the growth of Rs 5,000 monthly SIP in Birla Sun Life Frontline Equity Fund since inception.

Source: Advisorkhoj Research

By investing Rs 5000 in Birla Sun Life Frontline Equity Fund (Growth Option) through monthly systematic investment plan (SIP) you could have accumulated a corpus of nearly Rs 40 Lakhs with a cumulative investment of only Rs 8.75 Lakhs. The annualized SIP return of the fund since inception is nearly 19%.

Dividend Payout Track Record

Birla Sun Life Frontline Equity Fund, Dividend Option has a strong dividend payout track record since its inception, even during bear markets.

Conclusion

Birla Sun Life Frontline Equity Fund has built a strong reputation as a wealth creator for its investors. This fund is suitable for investors looking for high capital appreciation over a long time horizon, for long term financial objectives, such as retirement planning, children’s education etc. Investors can consider investing in the scheme through the systematic investment plan (SIP) or lump sum mode with a long time horizon. Investors should consult with their financial advisors, if Birla Sun Life Frontline Equity Fund is suitable for their financial planning objectives.