Birla will swing the balance

If the A V Birla group's record is anything to go by, its latest mutual fund offering should become another winner. The group, whose income, growth and tax funds have won acclaim for their performance, launched the Birla Balance fund on 6 September 1999. The offer closes on 4 October. For details of scheme, .

The group is not setting targets yet for the size of this open-ended fund, or at least it is not willing to talk about it. But, if you go by the reasoning that has gone into the launch of this fund, you can expect the Birla Balance to become pretty large in the next few years.

The reasoning is clear -- as it is with all balanced funds. Some investors like to take greater risks, some want greater security even if it means lower returns, and some others who want to tread the middle path. In fact, the risk takers too want to hedge their bets, and many risk averse investors want to test the waters of capital appreciation. All in all, these amount to a large number of people for whom a balance fund is the answer.

Excellent track record But there's always the slip between cup and lip. The idea may be great -- can it be implemented? The group, which has now consolidated its finance businesses under the Birla Global Finance umbrella, has several successful, award-winning funds -- Birla Advantage, a growth fund, Birla Income Plus, an income fund, and its Birla Taxplan schemes.

Typically, a balanced fund invests 50 to 70 per cent of its corpus in equities, and the remaining in debt, thus balancing high appreciation prospects with secure fixed incomes. Managers of such funds modify the mix of equity and debt holdings, depending upon the trends in the stock and debt markets.

Says A V Birla group chairman Kumar Mangalam Birla, "We have set our sights high. Ou raim is to cross the Rs 3,000 crore mark by the end of the calendar year."

The group is working on new ways of marketing its schemes. According to N K Sharma, who is in charge of business development at Birla Global, the group's payroll savings plan has begun to meet with some success. Launched in May, the plan invites companies to deduct fixed amounts from interested employees' salaries to invest in one or other Birla fund. According to Mr Sharma, the group has managed to get ten corporate accounts after making a hundred presentations.

Birla Global managing director S K Mitra exhudes confidence about the group's funds reaching the target of Rs 3,000 crore in quick time. "We already have a corpus of some Rs 2,300 crore. We'll get there," he says.

"No use for rocket science" Equity investments in India have been a dicey proposition, even for the specialised managers of mutual funds. However, the Birla team, led by Bharat Shah, has been on the ball with its stock picking, and has returned better-than-average results year after year, not only beating the market, but also improving the net asset values of its schemes through thick and thin.

Mr Shah is clear about what he wants. He says he has no use for "rocket science", nor does he believe in "artificial distinctions between cyclical stocks and value stocks and blue chips". "Basically, we look for certain characteristics in a company. Is it in a good business? Does it have good management? Is the price of the share good? And so on. If these characteristics exist, then we go for that company. And we are in it for the long term, the short term ups and downs don't interest us.

According to Shah, "Compounding of wealth doesn't come from monitoring the economy, nor from so-called hot sectors. The so-called hot sectors could have some dud stocks. On the other hand, if we restrict ourselves to sectors, we would miss out on excellent companies like Crisil, which would be difficult to fit into any particular sector."

Birla Balance is the first fund to be launched after the A V Birla group joined hands with Sun Life Assurance Company of Canada in July 1999. The Indian group had a tie-up with Capital group of the US earlier, which was terminated in end-1998.

As Jeremy Beswick, chief executive officer of the Birla Sun Life Asset Management Company, points out, "At Sun, we have a simple investment philosophy -- we are a stock picking company, not an asset allocation company, we employ analysts, not economists. By a happy coincidence, Bharat Shah and his team have been employing the same philosophy as Sun Life's and that of Massachusetts Financial Services."

As Mr Beswick points out, the Boston-based MFS, which Sun Life acquired in 1982, was the company that launched the world's first open-ended fund in March 1924. "That fund has paid a quarterly dividend without fail over the years, without missing a single quarter."

MFS, which manages over 60 different schemes in US, Europe, and elsewhere, is the fourth largest pure fund management company in the world, according to Mr Beswick.