HDFC MIP Long-Term maintains an aggressive stance, but is not risky (Analyst Review:Value Research )

HDFC MIP Long-Term maintains an aggressive stance, but is not risky

With average assets under management (AAUM) of Rs 960.39 crore (June 30, 2009), it's the biggest player in the Monthly Income Plan (MIP) category.
Its annual performance is more or less in line with the category average. But over the long-run, it has delivered an annualised 3-year return of 12 per cent (June 30, 2009), while the category average stood at 9 per cent. It also curtailed its fall to a lower level by delivering -8.24 per cent in 2008 (category average: -10.95%).
The fund manager exercises his equity mandate (maximum 25%) quite aggressively with an average exposure of 23.59 per cent to equities. But that does not mean it's a risky proposition. He maintains a diversified portfolio that has averaged 39 stocks, though there are instances when it has gone to 43 (November 2008). The maximum allocation that a single stock has touched is 3.29 per cent.
Though the fund manager does not churn his portfolio rapidly, he skillfully dabbles in stocks of all market caps. Over March-May 2009 period, he averaged an equity exposure of 25.44 per cent with an increased focus on smaller stocks. The large-cap exposure averaged at 19 per cent, though it started off this year with an exposure of 33 per cent. That was a smart move. The fund turned in a return of 18.65 per cent (category average: 14.24%) over this period during which the BSE Small-Cap (92.75%) and BSE Mid-cap (83.33%) outperformed the Sensex (64.48%).

Returns and Risk Aggregates   Rating & Risk     Modern Portfolio Stat     Volatility Measures  Fund Rating    R-Squared 0.61    Mean 10.44  Fund Risk Grade High    Alpha 6.66    Standard Deviation 10.65  Fund Return Grade Above Average    Beta 0.95    Sharpe Ratio 0.52

On the debt side, the fund has recently been casting its lot with G-Secs, structured obligations and debentures. Although, historically the fund manager refrains from aggressive maturity bets, in December 2008 it went up to 6.03 years (October 2008: 3.64 years). In fact, ever since September 2008, the average maturity of the portfolio has been on the higher side. But he does not compromise on quality and though the average rating of the portfolio occasionally drops to AA-rated paper, it is mostly in AAA-rated paper. The fund eventually benefitted by delivering 0.83 per cent (December 2008 quarter) as against the category average of -0.99 per cent.
Looking at the historical performance, the fund has paid a dividend since inception almost every single month. Though it skipped dividend for two months in 2008 (October and November), it later rewarded investors with a high dividend of 2.40 per cent (December 2008).
Although the fund has managed to keep its expense consistently below 2 per cent, it's slightly higher when compared to its peers