Kothari Pioneer Bluechip: For above-average returns

Suresh Krishnamurthy

Recommendation: Fresh investments can be made in Kothari Pioneer Bluechip considering that the performance of the fund over different market cycles has been decent. The net asset value per unit of the fund is Rs 24.51 for the growth option and Rs 16.02 for the dividend option.

Investments may, however, need to be made with a medium-term perspective. The investment strategy of the fund may not deliver returns comparable with some of its peers during a bull run alone and need to be compared over a few market cycles. The investment strategy has, however, helped the fund remain in the top quartile of the fund performers over a longer time-frame such as three or five years.

Suitability: The fund is suitable for investors seeking a medium-term investment proposition of close to three years or more. The fund focuses on a diversified portfolio of stocks and emphasises on stocks with large market capitalisation. This is a desirable feature for investors concerned with liquidity of a portfolio.

The fund's strategy is to hold stocks over a relatively longer time-frame rather than book profit at regular intervals and redeploy the proceeds. This investment strategy may tend to increase the risk profile of the fund. The strategy of active portfolio trading is less riskier compared to Bluechip's strategy but returns may not be in line with market performance.

In contrast, Bluechip's strategy comes with a lower degree of uncertainty compared to its peers in terms of expected return linked to the market performance. In this regard, the performance track record of the fund is a positive factor. In this backdrop, Bluechip appears suitable for an investor aiming for above average returns adjusted for risk that is slightly lower than market average.

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Portfolio allocation: As at the end of December 2000, the top holdings in the fund are ITC, Infosys Technologies, NIIT, HCL Technologies and Reliance Industries. In terms of sectoral allocation also, the fund has refrained from taking large bets. The IT sector at 31 per cent and FMCG sector at 13.4 per cent are the only ones in which the fund has invested more than 10 per cent. The fund reduced the cash position of the fund from around 22 per cent at the end of September 2000 to close to 8.3 per cent at the end of December 2000.

Background: The fund was launched in December 1993 and the fund manager is Mr K.N. Siva Subramanian. In the last three years, the fund's performance would put it in the top quartile among comparable mutual fund schemes. The entry load is two per cent while there is no exit load.