Product Update: ABSL Equity Hybrid ‘95 Fund

The fund is an aggressive hybrid fund with 65-75% exposure to equities and the rest to debt instruments.
The fund follows a disciplined profit booking approach as valuation reaches the target levels or with
alternative investment opportunity offering higher risk adjusted returns being available. This blend helps
tide over volatility of equity markets by protecting the downside while providing opportunity to generate
higher risk-adjusted returns.

Portfolio Positioning

 Currently the fund has 75% exposure to equity. 30-35% of equity exposure (26% of total exposure)
is in mid-small cap stocks. The fund seeks to maintain equity exposure in 65%-75% band.
 The fund has a well-diversified portfolio currently which should start outperforming as market
breadth improves. We are trying to consolidate positions by weeding out underperformers and
reducing the number of shares in the portfolio.
 We remain cautious going into elections and are booking profits while keeping cash to add positions
in case market corrects post-election results.

Sector Positioning

 The fund is overweight on Banks/Financials sector and has added exposure to corporate banks like
Axis, SBI and ICICI and maintains overweight on retail banks. We have consolidated and confined
our holdings in NBFC space in companies with good parentage and granular retail books which we
expect to do well.
 The fund is also overweight on Consumer space especially Consumer Discretionary space having
added Bata, Crompton Greaves Consumer Electricals, Titan and Whirlpool. There is some
slowdown recently but this seems temporary.
 Portfolio also has exposure to Media space – Zee, Inox Leisure and Sun TV as a consumer play.
There has been de-rating recently as market fears competition from OTT players like Netflix but we
feel that it is more a longer term concern and cash flow generation in the medium term remains
strong and the space should see some consolidation.
 Positive on capital goods like Bharat Electronics and CG Power. Positive on Construction space as
execution remains strong with strong order books despite slowing order flow which might remain
weak post elections as well. But top-line growth and execution remains strong with RoEs and
leverage improving. We feel valuations are attractive and can expect a ratings upgrade.
 We have booked some profits in IT stocks as growth outlook remains muted with pressure on
margins and expect earnings growing in-line with topline in the 9-10% range. Exited TCS at high
valuations, in fact TCS currently trading at all-time high P/E multiple. Underweight on IT space, see
no big negative but expect limited upside.
 We have reduced weight in Autos which have corrected recently due to slowdown in both 2-wheeler
and 4-wheeler volumes. This was due to higher insurance costs, availability of financing or price
increases due to regulatory changes. We expect the sector to start delivering in H2FY20. Currently
underweight but will re-evaluate after Q4 numbers where we expect earnings downgrade and
opportunities to add.
 We have a bottom-up and stock specific approach in Pharma. Have exposure to healthcare stocks
like Apollo Hospitals and Thyrocare which have better earnings outlook. We see pressure in US
generic pricing as well as domestic pricing pressure abating. Prefer domestic Pharma play like
Sanofi India and Eris Lifesciences over export-oriented stocks.
Portfolio Performance

3 year rolling returns (in %)

30

25

20

15

10

0
23-Feb-15

23-Feb-16

23-Feb-17

23-Feb-18

23-Feb-19
23-Jun-14

23-Dec-14

23-Jun-15

23-Dec-15

23-Jun-16

23-Dec-16

23-Jun-17

23-Dec-17

23-Jun-18

23-Dec-18
23-Apr-14

23-Aug-14
23-Oct-14

23-Apr-15

23-Aug-15
23-Oct-15

23-Apr-16

23-Aug-16
23-Oct-16

23-Apr-17

23-Aug-17
23-Oct-17

23-Apr-18

23-Aug-18
23-Oct-18

23-Apr-19
Aditya Birla Sun Life Equity Hybrid 95 Fund - Growth Nifty 50 S&P BSE 200

The 3-year rolling returns analysis of the fund returns shows that it has outperformed both a large cap
equity index and a broader market equity index except since Sep’18. This is largely due to 2 reasons:
1. Large caps outperformed mid & small caps over the past 1 – 1.5 years which led to the fund
underperforming as it has a slight mid-smallcap bias vs. peers and benchmark.
2. Unprecedented credit crisis along with Liquidity crisis in the debt markets, hurt the debt positions of
the fund. Ideally, the debt exposure supports the performance of the fund when the equity exposure
isn’t performing but this was an unusual period when both asset classes under-performed for the
fund.

The fund has started to make a comeback now that the broader markets have begun to recover.

NAV chart of ABSL Equity Hybrid 95 Fund

800.00

780.00

760.00

740.00

720.00

700.00
7.2%

680.00

Parameter 1 3 5 10 15 Since
Year Years Years Years years Inception
ABSL Equity Hybrid 95 Fund - Growth -1.4 9.7 13.3 15.6 15.3 19.5
CRISIL Hybrid 35+65 - Aggressive Index 6.9 12.3 12.3 13.1 12 14
Inception Date: 10th February 1995