Have you been hearing a lot about equity funds recently? If you are considering these funds for future investment, here is what you need to know about equity funds.
Equity funds are essentially designed for the purpose of enabling established publicly traded companies to raise capital from the market. For example, let’s assume that Aditya Birla Capital Ltd. wants funds to expand its operations.
This is likely to incur significant expenditure for Aditya Birla Capital Ltd. Many companies simply don’t have enough liquidity in their assets to be able to do so. Hence, companies benefit from gathering funds from hordes of small investors to pull off these large feats.
As an individual investor, your investment might not amount to much in the larger scheme. However, since the company is in need of capital, it, in turn, promises stocks to investors. Or in other words, agrees to transfer ownership rights to you. This means you will benefit from its smooth and stable operations over long periods. This is why equity funds are often seen as a safe and reliable investment, only over long periods of time. Also, equity funds often require investors to invest over 3 to 5 year time periods.
Birla Sun Life Frontline Equity Fund is a large-cap equity fund. This means the fund will direct most of its resources towards investing in companies with a large market cap. This means these companies are often the safest bet in the market.
On the other hand, these companies may lack the flexible dynamics of small companies and are likely to provide you with a smaller return per share. So, ideally, this scheme is suited for investors who are seeking long term growth with relatively smaller risks. This is the simplest way of understanding equity funds. However, there is a lot more you need to look into before you invest in an equity fund.
SEBI or the Securities and Exchange Board of India categorises companies according to their market size into large, medium, and small-cap firms. Large cap funds allocate over 80% of their total investments in top 100 large cap companies. Moreover, the scheme allocated 13% of its funding in mid-cap equities and 6% equities in small-cap companies.
As stated by the official website, the objective of the Birla Sun Life Frontline Equity fund is to generate long term growth, mainly capital. The scheme also promises to invest your savings into diverse sectors. Over the last five years, the equity fund primarily invested in banking and technology companies.
For example, over 9.84% of the total fund allocations were dedicated to purchasing stocks in HDFC Bank Ltd. Additionally, ICICI bank received over 8.36% of the fund allocations, while Infosys received 6.13% of the total funds.
Looking at fund allocations might be of interest to you as an investor. Although most equity funds deliver promising gains over long periods, the percentage of returns depends on the investment strategies. These vary widely, depending on the individual fund managers who choose the final stocks.
For detailed investments of the Birla Sun Life Frontline Equity fund, check out the chart below.
| Top Holdings of the Equity Fund | Weightage |
|---|---|
| HDFC Bank Ltd | 9.84% |
| ICICI Bank Ltd | 8.36% |
| Infosys Ltd | 6.13% |
| Reliance Industries Ltd | 4.76% |
| Housing Development Finance Corp Ltd | 4.32% |
| Larsen & Toubro Ltd | 3.74% |
| ITC Ltd | 3.74% |
| State Bank of India | 3.67% |
| NTPC Ltd | 2.49% |
| HCL Technologies Ltd | 2.46% |
The Birla Sun Life Frontline Equity Fund has opted to invest a large number of resources in the financial sector. The fund strategy is similar to many others in the market, which has prioritised high consumption products like banking.
Additionally, due to the rise of technology companies, a significant portion has also been dedicated to the same. Overall, the fund takes a balanced approach to investments. However, its key strategy of investing in the banking sector is similar to most other prominent ones in the market.
| Fund Performance | 3 Year | 5 Year |
|---|---|---|
| Sortino Ratio | 0.074 | 0.229 |
| Rolling Returns | 10.03% | 15.51% |
| Jensen’s Alpha | 0.18% | 3.50% |
| Sharpe Ratio | 0.092 | 0.412 |
| Sortino Ratio | 0.074 | 0.229 |
| Beta | 0.94 | 0.98 |
| Trailing Returns | 8.90% | 14.26% |
If you are planning to invest in the Birla Sun Frontline Equity Fund, you might want to know about terms like Sortino ratio or Rolling returns. Rolling returns refers to returns during a specific time period. These are calculated to understand the performance of schemes during specific periods, to understand the historical performance of the same scheme in the long run.
On the other hand, the Sortino ratio provides investors with a glimpse into a specific fund in relation to its risk. Sortino ratio provides a fair approach towards understanding how a risk-free and balanced approach has been utilised during the selection of specific stocks.
The other ratios and calculations are equally important for understanding the performance of equity funds. However, some simpler numbers like the AUM and details of fund managers can provide better insights into the Birla Sun Life Frontline Equity Fund.
AUM is the total number of assets under management. Birla Sun Life Frontline Equity Fund currently has over Rs. 20,692 crore (as on Sep 30, 2019) as its total AUM. This number shows the level of confidence investors have in a certain fund. Thanks to its early inception (in 2002) and robust performance over the years, the Birla Sun Life Frontline Equity fund continues to attract investor confidence.
The Aditya Birla Sun Life Frontline Equity Fund has adopted a balanced approach over the years. This has roughly translated to the fund devoting resources towards both strategic and defensive allocations.
The major sectors it has targeted include automobiles, software, banking, and consumer non-durables. The fund is a promising investment to stay away from market volatilities and is a safe path towards mitigating uncertain economic changes.
Check out the chart below for a detailed explanation of its latest investment portfolio in various sectors.
| Sector | Percentage of Exposure |
|---|---|
| Auto | 4.25% |
| AUTO ANCILLARIES | 1.01% |
| BANKS | 28.78% |
| CONSTRUCTION | 0.84% |
| CONSTRUCTION PROJECT | 2.9% |
| CONSUMER DURABLES | 2.17% |
| CONSUMER NON-DURABLES | 9.57% |
| FERROUS METALS | 1.67% |
| FINANCE | 11.05% |
| GAS | 0.98% |
| INDUSTRIAL CAPITAL GOODS | 1.25% |
| INDUSTRIAL PRODUCTS | 0.9% |
| MEDIA & ENTERTAINMENT | 1.59% |
| MINERALS/MINING | 0.88% |
| MUTUAL FUND | 0.17% |
| NON - FERROUS METALS | 2.01% |
| OIL | 0.46% |
| OTHERS | 3.74% |
| PESTICIDES | 0.72% |
| PETROLEUM PRODUCTS | 5.7% |
| PHARMACEUTICALS | 3.93% |
| POWER | 2.58% |
| SOFTWARE | 9.61% |
| TELECOM - SERVICES | 0.75% |
As you can see, the distribution is fairly wide in various other sectors. Among these, the auto sector has attracted significant attention from fund managers. While this is significantly higher than other sectors like Telecom, it continues to fall behind sectors like banking.
Please read the documents carefully regarding all sectors before as certain sectors come with underlying key risks such as securities.
There are many reasons why Aditya Birla Sun Life Frontline Equity Fund is a wise investment for potential investors. The fund was one of the earliest large-cap schemes among mutual funds schemes, and its investor confidence continues to rise. Currently, it holds the largest AUMs in the market due to its impeccable performance over the years.
Despite its great performance, it is important to mention that the fund is a long term investment and ideal for investors who have little knowledge of investments. Due to its moderate risks, the fund offers lucrative growth over conventional options such as a banks savings return.
Today, bank FDs rates can only deliver returns as high as 6-7%. On the other hand, a scheme like Birla Sun Life Frontline Equity Fund has delivered over 15% of returns to investors in the past. Furthermore, it is a promising way to save and invest in small amounts.
For example, many new job-seekers in the economy do not have high-incomes to invest in a long term bond or a house. Additionally, young people can often find it difficult to save at an early age. The Aditya Birla Sun Life Frontline Equity Fund can help in starting out with savings amounting to as little as Rs. 100 a month. Over long periods, such as 5 years, this scheme can not only help cut spending on non-essential expenses, but it can also create wealth for purchasing a new vehicle, home, or even retirement.
The documentation required for availing the Birla Sun Life Frontline Equity Fund usually just involves KYC documentation along with mobile verification. So, you can submit a copy of the passport, or Aadhar cardt, voter ID, or PAN card for identity verification. Additionally, you will be required to submit residential proof also. Apart from the documents mentioned above (apart from PAN card), you can submit your lease agreement, ration card, and utility bill for this procedure.
Finally, you will be asked to verify your mobile number mentioned on your Aadhar card through an OTP. Many websites also provide you with the option to upload these documents digitally and promise an investment gateway right away.
The Aditya Birla Sun Life Mutual fund was established in 1994. The Frontline Equity Fund is one of its premier offerings. The fund, like all its all offerings, is a collaboration between Aditya Birla Group and Sun Life Financial Inc. Aditya Birla Capital Limited has over 150 branches across India. You can contact its advisors to know more about its financial products through its website.
The Birla Sunlife Frontline Equity fund is a wise way to save. In today’s day and age, when it is difficult to save money, even savings schemes do not yield returns like they used to. For example, the highest FD rate you can expect in future can be around 5% - 7%. Equity fund schemes like the Birla Sunlife frontline can double this amount. Additionally, it is a great way to save for a rainy day. If you are a salaried employee, you may not even notice the missing Rs. 100, once you commit to it. However, over the course of 5 years, this nominal amount can turn into a substantial beginning for starting your own business, dealing with a medical emergency in the family, or saving for retirement.
There are various schemes in the market to choose from. Some of these also promise lucrative returns, like the Birla Sunlife Frontline Equity Fund. However, many of these have not been around for a long time. Although you expect better-projected returns on schemes provided by other mutual fund managers, the Birla Sunlife Frontline Equity Fund is the safest and wisest option among all of them.
