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Suresh Krishnamurthy

FRESH investments need not be considered in Pioneer ITI Prima Fund. The fund, with its focus on mid-cap stocks, has turned in a stellar performance in the recent months. But the sustained outperformance of mid-cap stocks over large-cap stocks is unlikely. In the event of a further sharp rise in performance, investors also need to be prepared for paring their exposures to the fund.

Investors who do not have any exposures to the fund could consider investments of smaller proportions, as such a strategy would provide exposure to mid-cap stocks. However, for the investment to deliver returns commensurate with the risk involved, the required time horizon may be longer.

Suitability: The volatility in the NAV has been much higher than most indices. It has been higher than even the CNX Midcap 200 indices — consisting of stocks with market cap of Rs 150-1,500 crore. This suggests that the risk involved in investing in the fund is much higher than most peer funds. Most peer funds invest a large portion of their funds in large capitalisation stocks.

Performance: Since June 1999 (from which period the values for CNX Midcap 200 are available), Pioneer ITI Prima has recorded a growth of 77 per cent in NAV in absolute terms. During the same period, CNX Midcap 200 gained only 10 per cent. BSE 200, a broad-based index, registered losses of 7 per cent in absolute terms.

The fund has delivered superior performance compared to market indices when reckoned from the peak of the bull market (February 2000 to now), at the trough of the bear market (June 1999 to September 2001) and from the trough of a bear market (From September 2001 to now).

However, the performance between February 2000 and September 2001 — peak of a bull market to the trough of a bear market — suggests that when the indices are at a high, investors would need to curtail their investments in the fund.

Portfolio allocation: The fund is more or less fully invested, with a cash position less than 4 per cent of the net assets. It is also considerably more diversified than a typical equity fund.

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