Birla Sun Life Frontline Equity has a great track record of wealth creation among Large Cap Funds

Some top performing equity funds have given 2 times returns in the last 3 years. Birla Sun Life Frontline Equity fund has given 17 times returns in 12 years, implying that on an average, investment in the fund has doubled in value every 3 years over a 12 year period. By the virtue of its long term track record, Birla Sun Life Frontline Equity Fund has earned the reputation of one of the biggest wealth creators. The chart below shows the growth of र 100,000 investment in the Birla Sun Life Frontline Fund since inception. We can see that a र 1 lac investment in the NFO would have grown to nearly र 17 lacs, implying compounded annual returns of over 24% inception.

The SIP performance of the fund since inception has been equally impressive. The chart below shows the return of र 3,000 monthly SIP in the Birla Sun Life Frontline Equity Fund (growth option) since inception. The SIP date has been assumed to the first working day of the month. The value of र 3,000 monthly SIP in the Birla Sun Life Frontline Equity Fund would have been over र 20 lacs, with a cumulative investment of only र 4.65 lacs. This implies an SIP return of over 20% since inception.

If we compare the 3 year rolling returns of Birla Sun Life Frontline Equity Fund with the benchmark BSE 100 index since the inception of the fund, we can see that the fund has beaten the benchmark on a consistent basis nearly 100% of the times. This is one the key performance attributes of a strong fund.

Fund Overview of Birla Sun Life Frontline Equity Fund

Birla Sun Life Frontline Equity Fund was launched in August 2002. It is one of the most popular large cap funds in the industry with an AUM base of nearly र 10,000 crores. The expense ratio of the fund is 2.21%. The fund is managed by veteran fund manager Mahesh Patil since 2005. Ever since Mahesh has been managing this fund, he has outperformed the average returns of large cap funds category on a consistent basis. The chart below shows the annual returns of Birla Sun Life Frontline Equity Fund versus the large cap funds category.

CRISIL ranks the fund 2 in the large cap funds category. Morningstar has a 5 star rating for this fund.

Portfolio Construction

The fund has a bias for large cap growth oriented stocks. Large cap stocks are nearly 85% of the portfolio value. In terms of sector allocation, the portfolio has a bias towards cyclical sectors like BFSI, Oil and Gas, Automobiles etc. To balance the exposure to cyclical sectors, the fund also has significant allocations to defensive sectors like IT, Pharmaceuticals and FMCG, which comprise about 28% 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 the coming years. In terms of company concentration the fund is fairly well diversified, the top 5 companies, HDFC Bank, Infosys, ICICI Bank, Reliance and L&T, all Sensex heavyweights, accounts for only 25% of the portfolio value. Even the top 10 companies account for only about 38% of the portfolio holdings.

Risk and Return

While the standard deviation of Birla Sun Life Frontline Equity fund is in line with average standard deviation of large cap funds as a category, the fund manager has delivered outstanding alpha. As a result the risk adjusting returns of the fund is excellent. The table details the performance the Birla Sun Life Frontline Equity fund versus the large cap funds category on several important performance parameters.

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.