Aditya Birla SL Frontline Equity Fund: Securing Long-term Growth

Oct 15, 2020

A significant number of large cap funds have struggled to outpace the benchmark index in the last few years. However, if you have invested in a large cap fund to achieve a particular goal, it is important to ignore the short term underperformance and stay invested till you reach the set target.

Mutual fund managers invest in a diversified portfolio of stocks and sectors. The performance of each stock/sector, market capitalisation depends on various micro and macro-economic factors. Over a period of time, growth may be conducive for select stocks/sectors and/or strategies, but not for others; though it is likely to play out eventually.

Over the long term, equity mutual funds across most categories and sub categories have been observed to deliver healthy returns, higher than most other investment avenues.

Aditya Birla SL Frontline Equity Fund (ABSLFEF) is one such large cap fund that has a history of rewarding investors with superior risk-adjusted returns over longer time periods.

Graph 1: Growth of Rs 10,000 if invested in Aditya Birla SL Frontline Equity Fund 5 years ago

ABSLFEF is among the few large-cap schemes with a history of close to 20 years, along with a superior track record to its credit. Since its inception in August 2002, ABSLFEF has appreciated at around 18.7% CAGR and has stood among top quartile performers during various time periods. While focusing on growth oriented large cap stocks, the fund gives high importance to risk management and resists putting investors' money to unnecessary risk. Over the past five years, ABSLFEF has generated a compounded annualised return of 7.8%, which is slightly lower than the 9.3% CAGR generated by the benchmark Nifty 50 - TRI. An investment of Rs 10,000 in the scheme five years back would have been valued at Rs 14,529. A simultaneous investment of Rs 10,000 in the benchmark would now be worth Rs 15,624.

Graph 1
Data as on October 13, 2020
(Source: ACE MF)

Table: Aditya Birla SL Frontline Equity Fund's performance vis-à-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Axis Bluechip Fund  17,270 5.60 13.50 10.86 12.43 15.07 17.11 0.097
Canara Rob Bluechip Equity Fund  788 14.21 14.26 10.40 11.93 14.01 18.56 0.087
BNP Paribas Large Cap Fund  849 5.97 12.27 7.16 9.17 14.06 18.48 0.041
Edelweiss Large Cap Fund  193 8.62 9.42 7.15 9.64 13.14 20.49 0.049
Kotak Bluechip Fund  1,678 10.34 10.91 6.90 9.36 13.86 21.09 0.041
Mirae Asset Large Cap Fund  18,450 8.51 9.04 6.42 11.55 17.16 21.17 0.042
ICICI Pru Bluechip Fund  23,423 2.58 5.16 3.96 9.09 12.78 20.52 0.008
SBI BlueChip Fund  22,058 2.85 7.30 3.54 8.36 14.00 21.12 -0.002
Aditya Birla SL Frontline Equity Fund  17,191 4.18 4.96 2.23 7.75 12.75 20.95 -0.018
HDFC Top 100 Fund  15,759 -5.30 0.19 0.87 6.55 11.38 22.51 -0.025
NIFTY 50 – TRI  6.65 7.97 6.78 9.32 11.40 21.20 0.038
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on October 13, 2020
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

ABSLFEF's performance in the ongoing corrective phase has not been too impressive which has impacted its short term performance. The fund has trailed the benchmark and many of its peers in the last 1-year to 3-year period. This is the first instance where the fund's performance has been under pressure. However, it has done well over longer time periods, delivering decent returns for its investors. Over the 7-year returns periods, the fund has generated compounded annualized return of 12.8%, which is over 1 percentage point higher than the benchmark index.

On the risk front, while ABSLFEF's returns have come at a reasonable volatility, it has seen a drop in its risk-adjusted returns calculated over the past 3 years due to poor returns in the last few years. Its Sharpe ratio is in a negative zone and far lower than the benchmark and the category average.

Investment strategy of Aditya Birla SL Frontline Equity Fund

ABSLFEF aims to generate market-beating returns by following a fundamental driven research approach. The fund invests around 85% in large caps, while it also seeks opportunities in midcaps where it allocates around 10% of its assets. ABSLFEF primarily follows bottom-up approach to investing, while also takes some tactical and structural calls through top-down approach. While picking stocks for its portfolio, the fund manager gives high weightage to growth and aims to invest in quality businesses supported by quality management and good balance sheet, and stays invested in them.

The starting point of the investment strategy is the thinking from a top down perspective, where the fund manager considers global and economic factors and then moves to bottom up strategy to pick stocks that can benefit in those scenarios. Anything that fits in top down and bottom up is preferred contender for the portfolio.

Graph 2: Top portfolio holdings in Aditya Birla SL Frontline Equity Fund

Graph 2 Graph 2
Holding in (%) as on September 30, 2020
(Source: ACE MF)

​ABSLFEF usually invests in a well-diversified portfolio of 60-65 stocks. The fund held 64 stocks in its portfolio as on September 30, 2020 reasonably diversified across individual stocks and sectors. Reliance Industries topped the list with an allocation of 8.1%, followed by Infosys, HDFC Bank and ICICI Bank. Bharti Airtel, HDFC, HUL, Cipla, Kotak Mahindra Bank and HCL Technologies have been among the other prominent holdings in the portfolio. The top 10 holdings accounted for about 50% of the portfolio.

Stocks like Reliance Industries, Avenue Supermarts, Infosys, Divi's Laboratories, Nestle India, Asian Paints, etc. have been the major contributors to ABSLFEF's gains in the last one year. On the other hand, the fund lost value in stocks like HDFC, ICICI Bank, Kotak Mahindra Bank, Ultratech Cement, among others.

With a combined exposure of close to 33% in Banking and Finance, ABSLFEF's portfolio is highly concentrated towards Financial services stocks, though it has reduced its exposure in the sector over the last one year. The fund also holds significant exposure Infotech, Consumption and Petroleum. Pharma, Telecom, Cement, Auto and Engineering figure among the other prominent sectors in the fund's portfolio.


ABSLFEF's performance has been under pressure for quite some time and has slipped in terms of rankings. However, the fund has proven its ability to generate market-beating returns over longer time periods. It resists from compromising on risk and does not aggressively chase returns. ABSLFEF has an experienced fund manager at the fore who has successfully steered the fund through multiple market cycles in the past. This makes ABSLFEF suitable for investors with moderately high risk appetite and investment horizon of at least 5 years.

Warm Regards,
Divya Grover
Research Analyst 

Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

Note:   This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds



About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the Research Analysts holding units of Aditya Birla SL Frontline Equity Fund;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation
  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure
  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Website: Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

Add Comments