Birla Sun Life India Gennext Fund: Creating wealth from rising consumption

Birla Sun Life India Gennext Fund is relatively less well known mutual fund scheme with an AUM base of just around र 360 crores. However, this fund is among the top mutual funds in terms of wealth creation for investors over the last 10 years. If you started a र 5,000 monthly SIP in Birla Sun Life India Gennext Fund 10 years back, your investment value today will over र 14 lacs, while your total investment would have been र 6 lacs only. In this last one year, while the Nifty fell by around 12%, the Net Asset Value (NAV) of Birla Sun Life India Gennext Fund fell by only 5%. At the same time, in 2014, while the Nifty gave return of 33%, the fund gave return of over 50%. Funds which deliver consistent outperformance in different market conditions are always desirable picks for your investment portfolios.

Birla Sun Life India Gennext Fund is a thematic fund which invests in companies that benefit from the rising consumption of the young population in India. While the population in many developed countries around the world are ageing, India has the highest youth population in the world. More than 50% of India’s population is below the age of 25 and more 65% below the age of 35. The demographic advantage of India, as per some economists, can add 2% to the GDP growth rate. The lifestyle and consumption patterns of the young population in India are markedly different from the older segments of our population. As more young people join the workforce and disposable incomes rise, it creates a huge market for companies who cater to the demands of this young population with tremendous growth potential. The investment objective of Birla Sun Life India Gennext Fund is to target capital appreciation by investing in companies that are expected to benefit from the rising consumption patterns in India, which in turn is getting fuelled by high disposable incomes of the young generation.

The fund was launched in August 2005. The expense ratio of the fund is 2.75%. Anil Shah and Chanchal Khandelwal are the fund managers of Birla Sun Life India Gennext Fund. The fund has delivered nearly 17% compounded annual returns since inception. CRISIL ranks this fund as a strong performer (Rank 2). Morningstar has a 5 star rating for this fund. The fund has delivered strong trailing annualized returns over different time-scales, as can be seen in the table below.

Source: Advisorkhoj Research

The annual returns of the fund relative to the category is also very strong (please see the chart below).

Source: Advisorkhoj Research

The chart below shows the NAV movement of the fund since inception.

Source: Advisorkhoj Research

We had discussed in our blog before that rolling return is one of the best measures of a fund’s performance since it is not biased by the time horizon in question. The rolling returns measure the returns given at every point of time in the period in question. The chart below shows the 1 year rolling returns of Birla Sun Life India Gennext Fund over the last 10 years. You can see in the chart below that, the fund has given nearly 20% annual returns almost 60% of the times over the last 10 year period. You should observe the decline in returns of the fund during the bear market periods over the last 10 years. You will note that, the declines during the bear market periods have been less than the market declines. The longer you hold the fund, higher is the probability of getting superior returns.

Source: Advisorkhoj Research

Portfolio Construction of Birla Sun Life India Gennext Fund

The investment strategy of Birla Sun Life India Gennext Fund seeks to identify companies with:-

• Strong top-line growth related to consumption demand of the young population


• Manufacturing or services companies that sell directly to the end user


• Distinct brand identity

The fund has a bias for large cap companies and the investment style has a growth focus. Large cap companies comprise 65% of the portfolio value. Since Birla Sun Life India Gennext Fund is a domestic consumption driven thematic fund, it is overweight on cyclical sectors like banking and finance, automobiles, consumer durables etc. Banking and Finance has the highest portfolio weight in terms of sector allocation at 32%. However, it has substantial allocations to defensive sectors like FMCG, Pharmaceuticals etc, which have a combined portfolio weight of 32%. The waterfall chart below shows the sector composition of Birla Sun Life India Gennext Fund.

Source: Advisorkhoj Research

In terms of company concentration the fund is very well diversified with the top 10 picks accounting for 33% of the portfolio value. The stocks in the fund’s investment portfolio are characterized by:-

• Pricing Power


• Cash Flow Visibility


• Products and Services innovations


• Lower sensitivity to cyclical economic movements

Some of the top stock picks in the fund’s portfolio are major success stories in equity investing in India. The table below shows key statistics of the Top 10 stocks in Birla Sun Life India Gennext Fund’s portfolio.

Source: Advisorkhoj.com and Moneycontrol.com (as on 13.04.2016)

Lump Sum and SIP Returns of Birla Sun Life India Gennext Fund

The chart below shows the growth of र 1 lac lump sum investment in Birla Sun Life India Gennext Fund (Growth Option) over the past 5 years.

Source: Advisorkhoj Research

A र 1 lac lump-sum investment in the fund, 5 years back would have doubled in value to र 2.1 lacs.

The chart below shows the returns of र 5,000 monthly SIP in Birla Sun Life India Gennext Fund (Growth Option) over the past 5 years.

Source: Advisorkhoj Research

With a monthly SIP of र 5,000 in Birla Sun Life India Gennext Fund (Growth Option) you could have accumulated nearly र 4.8 lacs in investment value, a profit of nearly र 1.8 lacs on an investment of र 3 lacs. The annualized SIP return of the fund over the last 5 years was over 18%.

Dividend Pay-out Track Record of Birla Sun Life India Gennext Fund

Birla Sun Life India Gennext Fund has a strong dividend pay-out track record. The fund has paid annual dividends every year since inception, except in 2006. The average dividend yield of the fund is quite good.

Source: Advisorkhoj Historical Dividends

Conclusion

Some financial advisors are of the opinion that, investors need to time their entry and exit in thematic funds. However, in Birla Sun Life India Gennext Fund, investors do not need to time their entry and exit, since the theme of this fund is integral to the long term India Growth Story. However, investors need to have long investment horizon for this fund. Investors can consult with their financial advisor if Birla Sun Life India Gennext Fund is suitable for their investment needs.