IL&FS Growth and Value Fund: Sell/Switch to alternative diversified fund

Recommendation: Sell/Switch to alternative diversified fund

S. Vaidya Nathan

INVESTORS in the IL&FS Growth and Value Fund can consider paring exposures in the fund.

Investors can look to deploying the funds in diversified funds with a better track record over a long time frame.

The fund has delivered fairly decent returns to investors who opted for the dividend option with payouts in 2000 as well as in February 2001. But investors in the growth option faced the rough end of the stick with a 10.9 per cent erosion in the initial investment.

The portfolio has a more diversified tilt now. But a few exposures still cause concern, for instance, Zee Telefilms, Global Tele-Systems, Shipping Corporation of India, Satyam Computer and Deldot Systems.

Since launch, the fund has adopted a fairly aggressive approach in terms of stock selection and portfolio churning. The approach may pay off, but going by the performance in the last 18 months, the downside risk may be more. With the degree of diversification in the portfolio, the fund may not find it easy to better than the key market indices.

In this backdrop, existing investors can sell their holdings in a phased manner and go in for schemes with a track record over a longer time frame.

Suitability: The fund may now be too diversified for comfort. Given its overall track record and the composition of the present portfolio, the IL&FS Growth and Value Fund is appropriate only for investors who can bear a high degree of risk.

Others can consider alternative options within equity9oriented schemes. Should investors switch to other funds, they may be better off going in for the dividend option. This offers superior tax efficiency -- at least in the next six months.

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Portfolio overview: The fund now has a corpus size of Rs 75.54 crore. The portfolio has a distinct old economy tilt, with IT exposures accounting for just 14 per cent. Barring the stocks mentioned above, the fund is now invested mainly in frontline stocks in various industrial segments.

Diversified companies account for 22 per cent of net assets. The fund has a cash position of five per cent. So any improvement in performance would gave to come from a broad-based rally and portfolio churning by the fund.

Fund facts: The fund was launched in October 1999. It is an open-end fund that offers entry with a load of 2 per cent over the NAV. The exit load is 2 per cent for cases of redemption within seven calendar days. These are with effect from July 1. The minimum amount for investment is Rs 10,000. It offers a growth plan, an annual dividend plan and a semi-annual dividend plan.

The fund announced a dividend of 10 per cent for the dividend plan in January 2000 for the dividend plan, 20 per cent for the Semi-Annual Dividend Plan in March 2000, and another 20 per cent in February 2001. For the annual dividend plan, a 20 per cent dividend was announced in April 2000. The NAV of the growth plan is Rs 8.91 per unit.