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Canpremium (RO)

Dhirendra Kumar

Canpremium is an open-ended conservative balanced fund from Canbank Mutual Fund. Launched in 1998, the fund has paid five dividends so far of 6.5 per cent in 1998, 6 per cent in 1999, two dividend cumulating to 19 per cent in 2000 and 15 per cent in March 2001. Entry into the fund is at a load of 1.75 per cent and redemptions before six months attract a load of 0.25 per cent. The fund only offers dividend option to investors.

FUND BASICS   Objective    Size (Cr)    NAV: 30/04/2001    Exit Price    Entry Price    Total Return   Balanced   5.02   12.26   12.26   12.47   22.52%

Canpremium (RO) has through its tenure maintained a 35:65 debt-equity ratio. The erstwhile portfolio of corporate debt papers, which was until 1999 also largely static, has since May 2000 been replaced with an aggressive exposure to government securities.

Starting from a 25 per cent allocation, these have now been scaled up to 61 per cent of the portfolio. Though there is no information as to the maturity of the debt portfolio, it is clear that the fund looks for trading profits in G-Secs rather than steady coupon income. For G-Secs being the most sensitive to changes in interest rates, their prices in comparison to other debt instruments of the same maturity rally the most during falling interest rates.

BENCHMARK COMPARISONS (%)      1M    3M    6M    1Yr    3Yr   Fund   13.02   14.91   26.40   37.51   22.82   VR Bal. Index   -0.53   -5.19   4.21   -5.06   6.23   Obj. Avg.   -1.34   -12.32   -8.02   -16.97   8.65

On the equity front, the fund has emerged as a contrarian, continuing to be guided by its conservative allocation and diversified portfolio. During the dominance of the tech stocks in 1999, the fund’s peers favoured a much higher allocation to stocks and an overweighing in technology, media and telecom counters in 1999. Hence, it did not come as a surprise when the fund, with a return of 30 per cent in that year, lagged far behind the category average of 61.4 per cent. However, the tables were turned in 2000. Thanks to the heavy redemption in February 2000, the fund booked huge profits at the right time in sectors of technology, media, telecom, pharma, FMCG and engineering. However, the fund also owed its success to its disciplined strategy.

While, the TMT sector accounted for a restricted 20 per cent, the rest spread across pharma, FMCG and diversified companies and an average 65 per cent in debt gave the fund good gains pushing it to the top performer’s league, while its tech heavy peers were left in the dust. The fund in 2000 returned 9.3 per cent as against the category average of negative 11.5 per cent in 2000. And in the current calendar, the fund has continued to thrive with the highest return of 22 per cent, way ahead of its successors. The average year-to-date return in the category of balanced funds was negative 9.33 per cent.

If you want a mix of equity rather than a whole hog debt fund, but would want to restrict the risks of equities, Canpremium, a debt-oriented balanced fund, is a good anchor. The diversification has limited the volatility in the fund. One good fund from an otherwise uninspiring AMC.

Top Holdings (28/02/2001)      Value (Cr)    % of Assets   GOI 2002   3.09   61.53   Infosys Tech.   0.34   6.85   H C L Tech.   0.19   3.72   Grasim Industries   0.16   3.19   Hoechst Marion Roussel   0.15   2.93   N I I T   0.12   2.47   S S I   0.10   2.03   Sterlite Optical   0.09   1.71   German Remedies   0.06   1.13   Zee Telefilms   0.05   1.02   Mahindra & Mahindra   0.05   0.96   Aptech   0.04   0.87

Source: Value Research

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