Birla Sun Life Pure Value Fund: Strong long term SIP returns through Value Investing

Mutual Funds article in Advisorkhoj - Birla Sun Life Pure Value Fund: Strong long term SIP returns through Value Investing
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We have discussed growth and value investing a number of times in our blog. For benefit of our readers who are not familiar with growth or value investing in mutual funds, let us briefly recap these two concepts.

    Growth Investment Style: In the growth investment style, the fund managers invest in companies that will experience faster growth in revenues, earnings per share (EPS) and share price. Growth stocks, even if they are perceived to be expensive, usually outperform the market in the near term.
    Value Investment Style: Value funds, on the other hand, invest in companies which are trading at a considerable discount to its intrinsic or fair valuation. The can be a number of reasons for these companies to be undervalued in the market and the valuations may remain depressed for a period of time, but in the long run these stocks can give outstanding returns.

The debate on growth versus value investing will continue, but in my opinion it really depends on the investment objectives and horizon of the investor. Over the last 3 years (April 2013 – April 2016), growth stocks in India, as represented by the MSCI Growth Index outperformed value stocks, as represented by MSCI Value Index. However, in the past one year (April 2015 – April 2016), in difficult market conditions, MSCI Value Index outperformed the MSCI Growth Index. Over a ten year period from April 2006 to April 2016, MSCI Value Index outperformed MSCI Growth Index.

Birla Sun Life Pure Value Fund, a midcap equity fund has delivered outstanding long term returns to investors by employing the value investing approach. If you had invested र 100,000 in the NFO of the scheme in March 2008, the value of your investment on May 1, 2016 would have been nearly र 400,000. The SIP returns of the fund have been simply outstanding. If you had started a monthly SIP of र 3,000 in the fund in April 1, 2008 the value of your investment today (May 1, 2016) would be more than र 7.2 lacs, while your cumulative investment over this period would have been less than र 3 lacs. A compounded annual SIP return of more than 21% is superlative, especially in light of the fact that, over the past 8 years, the Sensex has given only 6% annualized returns.
Fund Overview

Birla Sun Life Pure Value Fund was launched in March 2007. It has an AUM base of about र 430 crores. The relatively small AUM base, in fact, is an advantage for this fund because it primarily invests in stocks in the midcap segment. The expense ratio of the fund is a bit on the higher side at 2.9%. Mahesh Patil and Milind Bafna are the fund managers of this scheme. The fund has given more than 18% compounded annual returns since inception.

The chart below shows the trailing annualized returns of Birla Sun Life Pure Value Fund, midcap funds category and the benchmark BSE-200 index over different time-scales.