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If there was a magic wand that could wipe out specific periods of time, most investors would want to use it for the first seven months of 2008. After a dream run in 2007, the markets decided to usher in the bear in the new year. The investors who had gained courage from the prolonged bull run to enter equities were caught unawares and the value of their investments took a substantial hit. But equity investments are subject to market risk; that’s something all statutory warnings say. So, investors should not be alarmed at this turn in the market.
Is there anything they can do to prevent such unpleasant shocks in future? After all, investors seem to have short memories and conveniently forget that bear phases inevitably follow bull runs. Is there a convenient group of funds that can weather any storm? I’d like to think there is, and this is my pick of the top five all-weather funds.
A monthly investment of Rs 10,000 in any of these funds in the past 10 years would have meant a cumulative investment of Rs 12 lakh. This has swollen to anywhere from Rs 66 lakh to Rs 1.1 crore as on 30 June 2008. If one were to look at the highs of these funds, wealth creation would range from Rs 85 lakh to Rs 1.5 crore (in January this year).
At the end of it all, this is the short-list of five all-weather funds. All these funds have been through three distinct periods—the pre-tech boom that lasted from 1998-99, the tech boom over the next two years (up to the securities market scam of 2001, which led to a bear phase), and the recent bull run. Through all this, the corpus of the selected funds has grown steadily, sometimes to almost unmanageable amounts. Reliance Growth had started with a corpus of Rs 40 crore. Today, its corpus is Rs 4,856 crore.
These funds might not be the most hyped or highly ranked, and in some cases, performance might seem a tad erratic, but if you’re a long-term investor, it might make sense to add these funds to your portfolio. The peaks that these funds have achieved reflect their character—the funds that can weather market moods over the long term emerge as wealth creators.
Reliance Growth  Dhirendra Kumar says: Launched in 1995, the fund’s magical performance started only after 2002. During fund manager Kunj Bansal’s tenure of 2002-5, the fund’s corpus zoomed. It earned 155% returns in 2003 and outperformed its benchmark consistently in the next three years. A word of warning: its huge corpus of Rs 4,856 crore could be a drag on its performance. | HDFC Top 200  Dhirendra Kumar says: The fund has seen many changes from the time it was ITC Threadneedle. With the BSE 200 as its universe, it spreads its investment across well-known names. The fund performed consistently well till 2005, but has since lost steam, despite Prashant Jain being at the helm. However, it is known to lose less than others in a downturn. | |
Tata Pure Equity  Dhirendra Kumar says: Though it hasn’t performed brilliantly against its benchmark, it has shown three distinct spikes over the past 10 years. The first big boost was in 1999, when it doubled its benchmark return riding the tech boom. Another spike happened in 2003. Its army of loyal unit-holders have gained from these spikes in the past 10 years. | Franklin Prima Plus  Dhirendra Kumar says: When markets dip, this fund loses less than its benchmark, a performance that would encourage any investor. Although the fund house has changed ownership from Kothari Pioneer to Pioneer ITI and finally Franklin Templeton, the core investing team has remained the same. It has always outdone its benchmark, riding the 2004-6 bull run. | |
DSPML Equity Dhirendra Kumar says: This fund runs strongly when the bull is charging, but also suffers from hard falls that the bull experiences in the downward phase. What works in its favour is the diversity in its portfolio. It’s a fund with a higher level of risk, and only for those who can swallow the risk in a down market. | ||
— with Narayan Krishnamurthy
