Birla Sun Life Commodity Equity is an open-ended fund with the objective of offering long term growth of capital by investing in the stocks of companies in India or overseas which are engaged in or focusing on the specified commodity business and/or in overseas mutual fund scheme(s) that have similar investment objectives. The fund will have a flexi-cap approach in selecting a company. The fund has a 10 per cent cap per stock and doesn’t have any sector cap and country cap, except for 35 per cent cap for exposure in Indian stocks.
The fund will follow a quant model wherein the parameters include earning momentum (35 per cent), price momentum (15 per cent), earnings yield (30 per cent), turnover (5 per cent) and correlation with underlying commodity (15 per cent).
The weights to a stock will be assigned based on the weighted average ranking. The fund will finally create a portfolio of 20 to 30 stocks for each plan.
Commodity as an asset class is more volatile than equities and carries higher risk. The fund’s allocation pattern seems too complex and being a global fund, it is exposed to the currency as well as country risk. Further, the fund might also invest in other global mutual fund(s) which attracts additional management fees.
Ankit Sancheti (equity) and Vineet Maloo (debt) are the fund managers for the fund. At Birla Sun Life, Ankit handles funds like Long Term Advantage - Series 1, Basic Industries, Dividend Yield Plus, where most of these don’t have that good a track record. Thus we suggest investors to skip this fund.
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